There is a growing body of literature on ethical or socially responsible investment across a range of disciplines. This paper highlights the key themes in the field and identifies some of the major theoretical and practical challenges facing both scholars and practitioners. One of these challenges is understanding better the complexity of the relationship between such investment practices and corporate behaviour. Noting that ethical investment is seldom characterised by agreement about what it actully constitutes, and that much of the extant (...) research focuses on a narrow set of issues, the paper argues that there are benefits associated with examining ethical investment as a process. (shrink)

This article addresses the growing industry of retail socially responsible investment (SRI) profiled mutual funds. Very few previous studies have examined the final consumer of SRI profiled mutual funds. Therefore, the purpose of this study was to, in an exploratory manner, examine the impact of a number of pro-social, financial performance, and socio-demographic variables on SRI behavior in order to explain why investors choose to invest different proportions of their investment portfolio in SRI profiled funds. An ordinal logistic regression analysis (...) on 528 private investors revealed that two of the three pro-social variables had a positive impact on how much the consumer invested in SRI profiled funds. Moreover, there was proof of a non-altruistic motive for investing in SRI as consumers who perceive that financial return of SRI is equal or better than "regular" mutual funds, invested a greater proportion of their portfolio in SRI profiled mutual funds. Furthermore, the results showed that women and better-educated investors were more likely to invest a greater proportion of their investment portfolio in SRI. Overall, the findings indicate that both financial perceptions and pro-social attitudes are connected to consumer investment in SRI. (shrink)

There is a growing body of literature on ethical or socially responsible investment across a range of disciplines. This paper highlights the key themes in the field and identifies some of the major theoretical and practical challenges facing both scholars and practitioners. One of these challenges is understanding better the complexity of the relationship between such investment practices and corporate behaviour. Noting that ethical investment is seldom characterised by agreement about what it actully constitutes, and that much of the extant (...) research focuses on a narrow set of issues, the paper argues that there are benefits associated with examining ethical investment as a process. (shrink)

Socially responsible investment is a rapidly emerging phenomenon within the field of personal investment. However, the factors that lead investors to choose socially responsible investment products are not well understood, especially in an Australian context. This study provides a comparative examination of conventional and socially responsible investors, with the aim of identifying such factors. A total of 55 conventional investors and 54 ethical investors participated in the study by completing mailed questionnaires about their investment and general behaviour and their attitudes (...) and beliefs. Results indicated some important differences between socially responsible and conventional investors in their beliefs of the importance of ethical issues, their investment decision-making style, and their perceptions of moral intensity. These results support the notion that socially responsible investors differ in critical ways to conventional investors, and are discussed in terms of theoretical and practical implications. (shrink)

“Ethical investing” is interpreted in the following paper to be the use of non-financial normative criteria by investors in the choice ofsecurities for their portfolios.Ethical investors may aim at fulfilling duties they feel they have, possibly including increasing the amount of good in society through theconsequences of their buying and selling behavior. The main duties are those of not-profiting from bad corporate behavior and of punishing bad (or rewarding good) firms. The main consequence desired is that managers manage corporations in (...) a more ethical manner. But ethical investors (as opposed to some other kinds of investors who are also interested in normative issues) also aim at receiving returns based on the market risk of their investments.If the aim of managers is to maximize shareholder wealth, then ethical investors can fulfill their duties or achieve their desired consequences only if their trading activities affect shareholder wealth, i.e., share price. A theoretical argument is presented to show that this trading activity will not affect share price or return. In addition, reference is made to results of empirical studies which show that ethical stocks yield market returns, i.e., that the share price of ethical firms is unaffected by the actions of ethical investors.If the trading activity of ethical investors fails to affect share price and return, then these investors fail to fulfill any of their goals or to achieve their ends. (shrink)

Considers that intuitive predictions follow a judgmental heuristic-representativeness. By this heuristic, people predict the outcome that appears most representative of the evidence. Consequently, intuitive predictions are insensitive to the reliability of the evidence or to the prior probability of the outcome, in violation of the logic of statistical prediction. The hypothesis that people predict by representativeness was supported in a series of studies with both naive and sophisticated university students. The ranking of outcomes by likelihood coincided with the ranking by (...) representativeness, and Ss erroneously predicted rare events and extreme values if these happened to be representative. The experience of unjustified confidence in predictions and the prevalence of fallacious intuitions concerning statistical regression are traced to the representativeness heuristic. (shrink)

“Ethical investing” is interpreted in the following paper to be the use of non-financial normative criteria by investors in the choice ofsecurities for their portfolios.Ethical investors may aim at fulfilling duties they feel they have, possibly including increasing the amount of good in society through theconsequences of their buying and selling behavior. The main duties are those of not-profiting from bad corporate behavior and of punishing bad firms. The main consequence desired is that managers manage corporations in a more ethical (...) manner. But ethical investors also aim at receiving returns based on the market risk of their investments.If the aim of managers is to maximize shareholder wealth, then ethical investors can fulfill their duties or achieve their desired consequences only if their trading activities affect shareholder wealth, i.e., share price. A theoretical argument is presented to show that this trading activity will not affect share price or return. In addition, reference is made to results of empirical studies which show that ethical stocks yield market returns, i.e., that the share price of ethical firms is unaffected by the actions of ethical investors.If the trading activity of ethical investors fails to affect share price and return, then these investors fail to fulfill any of their goals or to achieve their ends. (shrink)

As moral decision making in financial markets incorporates moral considerations into investment decisions, some rational decision theorists argue that moral considerations would introduce inefficiency to investment decisions. However, market demand for socially responsible investment is increasing, suggesting that investment decisions are influenced by both financial and moral considerations. Several models can be applied to explain moral behavior. We test the suitability of (a) multiple attribute utility theory (MAUT), (b) theory of planned behavior, and (c) issue-contingent model of ethical decision making (...) in organizations. In an experimental setting, 141 participants traded company shares in a computerized asset market. Over 12 periods, companies varied in morality (i.e., treatment of employees) and in profitability (i.e., expected dividends per share). Participants’ bids and asks for shares were recorded. Results indicate that moral considerations influence investment decisions, controlling for profit. Differences between the three models are discussed. (shrink)

In this article, we document the growing influence of non-governmental organizations (NGOs) in the realm of socially responsible investing (SRI). Drawing from ethical and economic perspectives on stakeholder management and agency theory, we develop a framework to understand how and when NGOs will be most influential in shaping the ethical and social responsibility orientations of business using the emergence of SRI as the primary influencing vehicle. We find that NGOs have opportunities to influence corporate conduct via direct, indirect, and interactive (...) influences on the investment community, and that the overall influence of NGOs as major actors in socially responsible investment is growing, with attendant consequences for corporate strategy, governance, and social performance. (shrink)