A plea for a stronger role of non-financial impact in the socially responsible investment discourse

• DOI: https://doi.org/10.1108/CG-01-2020-0039
• Pages: 294-306
• Published date: 08 October 2020
• Date: 08 October 2020
• Subject Matter: Strategy,Corporate governance
• Author: Joel Diener,Andre Habisch

A plea for a stronger role of non-f‌inancial

impact in the socially responsible

investment discourse

Joel Diener and Andre Habisch

Abstract

Purpose –This paper aims to emphasize the importance and current deficits of non-financial impact

(NFI) assessment of socially responsible investment (SRI) with reference to the action plan of the

EuropeanCommission (EC) for a greener and cleanereconomy.

Design/methodology/approach –The importance and current deficits of NFI assessment are

evaluated theoretically and condensed to an equilibrated socially responsible investment (ESRI)

perspective,based on a narrative literature reviewof highly ranked academic journals.

Findings –Due to a deficient exploration of NFI in theory and practice, the role of SRI funds for sustainability

transition has not yet been adequately discussed. This has enabled a situation where a constantly rising

market share of SRI has not led to similar sustainability achievements. This strongly contrasts with investors’

expectations, the self-portrayal of the sector and the goals of the EC’s action plan. As a solution, the

developed ESRI perspective elevates NFI as a second cornerstone for theory and practice. ESRI, contrary

to the EC, sets a primer on the role of SRI fund managementfor achieving sustainability goals.

Originality/value –This study reveals how SRItheory and practice neglect the importance of NFI. The

presented ESRI perspectiveenables scholars to examine SRI practices moreholistically through a new

theoretical lens.One special focus is on the role of SRI fund management as a transmissionmechanism

to push portfoliocompanies’ business practicestoward more sustainable behavior.

Keywords Corporate social responsibility (CSR), Socially responsible investment (SRI), Environment,

Social, Governance (ESG), Equilibrated socially responsible investment (ESRI), Non-f‌inancial impact (NFI)

Paper type Conceptual paper

1. Introduction

With its action plan for a greener and cleaner economy, the European Commission (EC)

wants to use socially responsible investment (SRI) to achieve the climate and energy

targets of the Paris Agreement. This sparks off the question about the role which SRI has

and can play to impact this world for good. Although SRI has reached a market share of

26% [Global Sustainable Investment Alliance (GSIA), 2016], its globally increased

relevance has not led to similar sustainability achievements. By contrast, indicators show

that the situation has become worse:the global consumption of resources in 2017 was 70%

above what nature can regenerate–compared to 60% in 2012 (WWF, Zoological Society of

London and Global Footprint Network, 2016)–and is estimated to rise to 160% by 2050

(Moore et al., 2012). Biodiversity has showna heavy decline, with 58% of all species having

become extinct since 1970 and a forecast of 67% by the end of the current decade (WWF,

Zoological Society of London and Global FootprintNetwork, 2016). In addition, no country is

currently on track to achieving the social development goals (SDG) of the UN (SDSN and

IEEP, 2019). This situation is contrary to what the EC is hoping to achieve and an indication

that more needs to happen than to just increasethe amounts invested in SRI.

Joel Diener and

Andre Habisch are both

based at the Faculty of

Business and Economics,

Catholic University of

Eichsta

¨tt-Ingolstadt,

Ingolstadt, Germany.

Received 29 January 2020

Revised 25 June 2020

15 September 2020

Accepted 17 September 2020

Funding: Joel Diener wishes to

express his deepest gratitude

to “Stiftung der Deutschen

Wirtschaft” for the PhD

scholarship he received.

Declaration of conflicting

interests: The authors declared

no potential conflicts of interest

with respect to the research,

authorship and/or publication

of this article.

The authors are thankful for the

comments, advice, and

suggestions of two

anonymous referees.

PAGE 294 jCORPORATE GOVERNANCE jVOL. 21 NO. 2 2021, pp. 294-306, ©Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-01-2020-0039