Jos Leys

This paper explores semi‐formal interactions between SRI‐investors that take the governance route rather than deploy a best‐in‐class logic or exclusionary screening. On the basis of a stakeholder typology of the investor and of the chosen topic of interaction, namely compliance with the core ILO labour conventions, the paper formulates 10 expectations about management reactions to the concerns raised by investors. These expectations cover responsiveness, acknowledgment of positions and general attitude. The expectations are then related to the factual discourse by management responding to such concerns raised by investors. Based on data obtained from the Portfolio21‐correspondence, which is a joint initiative of European investors, it is found that management is very willing to discuss cases but at the same time denies the truth‐value of the allegations. Here, the problem of information asymmetry comes to the fore.

As Socially Responsible Investment (SRI) enters the mainstream of professional and institutional investment practice, some perplexities arise. Some SRI market participants are well schooled in finance but are hesitative as to how to apply non-financial criteria in the management of portfolios. Governments too are giving SRI more attention and, in some countries, are discussion whether and how to regulate the SRI market. Advocacy groups are targeting SRI projects through media campaigns using political discourse. Many of the pertinent questions that come with these perplexities are of the philosophical or ethical type and concern legitimisation, demarcation of responsibilities, interpretation of norms and policy formulation. The inclusion of non-financial criteria into investment decision-making leads to a 'puzzle in SRI' for which this article offers a solution. The puzzle arises when the day-to-day implementation of an SRIpolicy coincides with the process of administering justice. Three questions make up that puzzle: (1) what should an investor do when allegations arise about a corporation, (2) what should an investor do when a corporation is brought before a court, (3) what should an investor do when a corporation is found guilty by a court. This article argues, by distinguishing between the rationality of the investor and that of the judge, that allegations, court cases or court verdicts should not be reasons to disinvest from a corporation. This article offers examples from investor practice and points out in which way allegations, court cases and court verdicts make sense for investor behaviour

This introduction to the special issue on information asymmetries in socially responsible investment introduces the concept of information asymmetries and offers an overview of how such information asymmetries pertain to SRI. We first point out that all Abanking@, in its different metiers, always is concerned with information asymmetries. That introductory concept is succeeded by an overview of the different metiers in banking. We try to diminish a general information asymmetry regarding the financial professions in general and their scope for SRI more specifically. We then distinguish several types of information asymmetry that may be at play in SRI-projects and introduce the contributions in this issue.

This paper, an epilogue to the special issue on socially responsible investment, is a first attempt to philosophically tackle information asymmetries that pertain to the consequences or the effectiveness of SRI-policies. The paper discerns four types or techniques of SRI: 1) shareholder engagement; 2) the selection of best-in-class entities; 3) the maintenance of categorical exclusions; 4) the financing of alternative economies. For each technique, the paper first briefly sketches the mechanism that is put to work by the SRI-investor. Then, I try to assess whether the investor is able to know whether or not his SRI-effort is being or has been effective in the real world.

Socially Responsible Investment (SRI) has grown considerably over the past three decades. One form of SRI, engagement-SRI, is today by far the most practiced form of SRI (in assets managed) and has the potential to mainstream SRI even further. However, lack of formalized engagement procedures and evaluation tools leave the engagement practice too opaque for such a mainstreaming. This article can be considered as a first step in the development of a standard for the engagement practice. By developing an engagement heuristic, this article offers a more transparent engagement dialog. Drawing on Stevenson's and Austin's speech-act theories, this article develops a classification of management's responses to the signaling of allegations and controversies on two dimensions: a factual dimension concerning (dis)agreements on factual claims and an attitudinal dimension concerning (dis)agreements on responsibilities, values, and norms. On the basis of the distinctions this article develops, the authors provide for a synoptic table and offer a next-step heuristic for the engagement process that started with signaling a concern to management. The article uses an engagement logic that, while keeping the exit option for the investor open, allows management to address signaled concerns without having to let down or to opt out at the first setback in the dialog process between investor and investee corporation

‘Stakeholder’ and related notions have been coined to enhance managerial practice in mainstream corporations. Currently, these notions are abundantly present in all kinds of discourses, especially those on ‘socially responsible investing’. But what kind of stakeholder management are these socially responsible investors promoting and what might be reasonable expectations about outcomes? We find that they promote an approach that has shareholder value as motivation and legitimisation and that they nowhere promote sharing of governance with stakeholders other than shareholders. We explain why this might reasonably be expected. Besides mainstream investors and corporations, investing through co-operatively structured corporations differs regarding stakeholder positions with respect to the position of at least one stakeholder group, whether this be consumers, employees or producers. What are the implications thereof and are these investments then superior from a socially responsible perspective on investment? We find that co-operative investors meet their own set of difficulties in implementing stakeholder management. Our questions and findings enable us to formulate some critical remarks on the stakeholder-notion in both discourses and in general. We suggest that its use, if not halted altogether, should at least be restricted and substituted by the use of more specific notions.

As Socially Responsible Investment (SRI) enters the mainstream of professional and institutional investment practice, some perplexities arise. Some SRI market participants are well schooled in finance but are hesitative as to how to apply non-financial criteria in the management of portfolios. Governments too are giving SRI more attention and, in some countries, are discussion whether and how to regulate the SRI market. Advocacy groups are targeting SRI projects through media campaigns using political discourse. Many of the pertinent questions that come with these perplexities are of the philosophical or ethical type and concern legitimisation, demarcation of responsibilities, interpretation of norms and policy formulation. The inclusion of non-financial criteria into investment decision-making leads to a ‹puzzle in SRI’ for which this article offers a solution. The puzzle arises when the day-to-day implementation of an SRI-policy coincides with the process of administering justice. Three questions make up that puzzle: (1) what should an␣investor do when allegations arise about a corporation, (2) what should an investor do when a corporation is brought before a court, (3) what should an investor do when a corporation is found guilty by a court. This article argues, by distinguishing between the rationality of the investor and that of the judge, that allegations, court cases or court verdicts should not be reasons to disinvest from a corporation. This article offers examples from investor practice and points out in which way allegations, court cases and court verdicts make sense for investor behaviour.

Socially Responsible Investment (SRI) has grown considerably over the past three decades. One form of SRI, engagement-SRI, is today by far the most practiced form of SRI (in assets managed) and has the potential to mainstream SRI even further. However, lack of formalized engagement procedures and evaluation tools leave the engagement practice too opaque for such a mainstreaming. This article can be considered as a first step in the development of a standard for the engagement practice. By developing an engagement heuristic, this article offers a more transparent engagement dialog. Drawing on Stevenson’s and Austin’s speech-act theories, this article develops a classification of management’s responses to the signaling of allegations and controversies on two dimensions: a factual dimension concerning (dis)agreements on factual claims and an attitudinal dimension concerning (dis)agreements on responsibilities, values, and norms. On the basis of the distinctions this article develops, the authors provide for a synoptic table and offer a next-step heuristic for the engagement process that started with signaling a concern to management. The article uses an engagement logic that, while keeping the exit option for the investor open, allows management to address signaled concerns without having to let down or to opt out at the first setback in the dialog process between investor and investee corporation.

‘Stakeholder’ and related notions have been coined to enhance managerial practice in mainstream corporations. Currently, these notions are abundantly present in all kinds of discourses, especially those on ‘socially responsible investing’. But what kind of stakeholder management are these socially responsible investors promoting and what might be reasonable expectations about outcomes? We find that they promote an approach that has shareholder value as motivation and legitimisation and that they nowhere promote sharing of governance with stakeholders other than shareholders. We explain why this might reasonably be expected. Besides mainstream investors and corporations, investing through co-operatively structured corporations differs regarding stakeholder positions with respect to the position of at least one stakeholder group, whether this be consumers, employees or producers. What are the implications thereof and are these investments then superior from a socially responsible perspective on investment? We find that co-operative investors meet their own set of difficulties in implementing stakeholder management. Our questions and findings enable us to formulate some critical remarks on the stakeholder-notion in both discourses and in general. We suggest that its use, if not halted altogether, should at least be restricted and substituted by the use of more specific notions.