To provide a platform to foster rigorous research, collaborations with the investment industry, and disseminate knowledge related to responsible and sustainable investing.
Global Reallocation of Capital
We are witnessing an important shift in the investment world. Climate change, environmental, and social concerns are becoming a priority among companies and investors. Companies are adapting to a transition to a low carbon economy and market participants are recognizing the importance of climate-related risks. In 2021, Laurence Flink, the founder and CEO of BlackRock, the world’s largest asset management firm, committed to exiting certain investments that “present a high sustainability-related risk”. BlackRock is not a single case. With the Covid-19 crisis, there has been a large growth in inflows to funds that abide by environmental, social, and governance (ESG) principles. Assets under management in these funds are expected to surpass 41 trillion globally.
Defining “Responsible Investing”
Principles for Responsible Investment, a global network of investors that includes more than 300 signatories representing more than US$100 trillion in assets, defines responsible investing as the following: “Responsible investment is an approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance (ESG) factors, and the long-term health and stability of the market. It recognizes that the generation of long-term sustainable returns is dependent on stable, well-functioning and well-governed social, environmental, and economic systems. Responsible investment requires investors and companies to take a wider view, acknowledging the full spectrum of risks and opportunities facing them, in order to allocate capital in a manner that is aligned with the short and long-term interests of their client and beneficiaries.”
There is a large and growing literature on responsible investing with several unsettled questions. For example, there is a debate on whether responsible investing has a positive, neutral or negative impact on portfolio performance; on how to disclose and measure risks associated with climate change and sustainability-related issues; on the role of ESG investors and the best strategy to have a positive impact on society and contribute to a more sustainable economy.
Selection of Relevant Work
Ge, W. and Liu, M., 2015
“Corporate social responsibility and the cost of corporate bonds”, Journal of Accounting and Public Policy, 34(6): 597- 624.
Ding, S., Jia, C. and Wu, Z., 2016
“Mutual Fund Activism and Market Regulation during the Pre-IFRS Period: The Case of Earnings Informativeness in China from an Ethical Perspective”, Journal of Business Ethics, 138(4): 765-785.
Chkir, I., El Haj Hassan, B., Rjiba, H. and Saadi, S., 2021
“Does Corporate Social Responsibility Influence Corporate Innovation? International Evidence.”, Emerging Markets Review.