The Drivers of Responsible Investment: The Case of European Pension Funds
We investigate what drives responsible investment of European pension funds. Pension funds are institutional investors who assure the income of part of the population for a long period of time. Increasingly, stakeholders hold pension funds accountable for the non-financial consequences of their investments and many funds have engaged in responsible investing. However, it appears that there is a wide difference between pension funds in this respect. We investigate what determines pension funds’ responsible investments on the basis of a survey of more than 250 pension funds in 15 European countries in 2010. We use multinomial logistic regression and find that especially legal origin of the country, ownership of the pension fund and fund size-related variables are to be associated with pension funds′ responsible investment. For fund size, we establish a curvilinear relationship; especially the smallest and largest pension funds in the sample tend to engage with responsible investing.
KeywordsPension funds Socially responsible investment Survey Corporate social responsibility Responsible investing Europe Investments Multinomial logistic regression analysis
- Alm, K. (2007). Challenges to investment ethics in the Norwegian Petroleum Fund: A newspaper debate. Philosophica, 80, 21–44.Google Scholar
- Bénabou, R., & Tirole, J. (2010). Individual and corporate social responsibility. In F. Panunzi (Ed.), Institutions and markets series. Milan, Italy: Fondazione Eni Enrico Mattei.Google Scholar
- Boatright, J. (1999). Ethics in finance. Oxford: Blackwell.Google Scholar
- Capelle-Blancard, G., & Monjon, S. (2012). Trends in the literature on socially responsible investment: Looking for the keys under the lamppost. Business Ethics A European Review, 21(3), 239–250.Google Scholar
- Collet, D. (2003). Modelling binary data. Boca Raton: Chapman & Hall/CRC.Google Scholar
- Derwall, J. (2007). Economic virtues of SRI and CSR. PhD dissertation, University of Maastricht.Google Scholar
- Elkington, J. (1998). Cannibals with forks. Gabriola Island, BC and Stoney Creek, CT: New Society Publishers.Google Scholar
- Eurosif. (2010). European SRI study 2010. Retrieved October 18, 2010 from http://www.eurosif.org/research/eurosif-sri-study.
- Eurostat. (2009). Eurostat Ramon Database. Eurostat’s Concepts and Definitions Database (CODED). Retrieved July 23, 2009 from http://ec.europa.eu/eurostat/ramon/nomenclatures/index.cfm?TargetUrl=LST_NOM_DTL_GLOSSARY&StrNom=CODED2&StrLanguageCode=EN&CFID=18381190&CFTOKEN=b672215907b8ea96-A668034A-B6AE-6F3C-36A8B66AED2D8282&jsessionid=f900dff693ab2c2a141d.
- Galbreath, J. (2010). Drivers of corporate social responsibility: The role of formal strategic planning and firm culture. British Journal of Management, 21, 511–525.Google Scholar
- Hawley, J., & Williams, A. (2000). The rise of fiduciary capitalism: how institutional investors can make corporate America more democratic. Philadelphia: University of Pennsylvania Press.Google Scholar
- Hoepner, A. G. F., Rezec, M., & Siegl, K. S. (2011). Does pension funds’ fiduciary duty prohibit the integration of environmental responsibility criteria in investment processes? A realistic prudent investment test. Retrieved May 21, 2012 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1930189.
- Hoepner, A. G. F., & McMillan, D. G. (2009). Research on ‘responsible investment’: An influential literature analysis comprising a rating, characterisation, categorisation and investigation’, working paper. St Andrews: University of Saint Andrews, School of Management.Google Scholar
- Hosmer, D. W., & Lemeshow, S. (1989). Applied logistic regression. New York: Wiley.Google Scholar
- Ioannou, I., & Serafeim, G. (2010). What drives corporate social performance? International evidence from social, environmental and governance scores. Retrieved September 1, 2011 from http://ssrn.com/abstract=1661925.
- Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of Management Review, 20, 404–437.Google Scholar
- Langley, P. (2008). Pension fund capitalism, pension fund socialism and dissent from investment. In M. Taylor (Ed.), Global economy contested, power and conflict across the international division of labour. London: Routledge.Google Scholar
- Lemeshow, S., & Hosmer, D. W., Jr. (1984). Estimating odds ratios with categorically scaled covariates in multiple logistic regression analysis. American Journal of Epidemiology, 119, 147–151.Google Scholar
- Margolis, J. D., Elfenbein, H. A., & Walsh, J. P. (2007). Does it pay to be good? A meta-analysis and redirection of research on the relationship between corporate social and financial performance. Retrieved February 2, 2012 from http://stakeholder.bu.edu/docs/walsh,%20jim%20does%20it%20pay%20to%20be%20good.pdf.
- McWilliams, A., & Siegel, D. S. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26, 117–127.Google Scholar
- Monks, R. A. G. (2001). The new global investors: How shareowners can unlock sustainable prosperity worldwide. Oxford: Capstone.Google Scholar
- OECD. (2006). OECD Guidelines on pension fund asset management. Retrieved February 2, 2012 from http://www.oecd.org/dataoecd/59/53/36316399.pdf.
- OECD. (2009a). OECD glossary of statistical terms. Retrieved July 23, 2009 from http://stats.oecd.org/glossary/.
- OECD. (2009b). Pensions at a glance: Retirement-income systems in OECD countries. Retrieved October 12, 2010 from www.oecd.org/els/social/pensions/PAG.
- Scholtens, B., & Sievänen R. (2012). Drivers of socially responsible investing: A case study of four Nordic countries. Journal of Business Ethics. doi:10.1007/s10551-012-1410-7.
- UN PRI–United Nations Principles for Responsible Investment. (2011a). Principles for responsible investment. Retrieved May 31, 2011 from http://www.unpri.org/principles/.
- UN PRI–United Nations Principles for Responsible Investment. (2011b). Preview of questions reporting and assessment survey. Retrieved July 31, 2011 from http://www.unpri.org/reporting/20110309_previewofquestions_2011.pdf.
- UN PRI–United Nations Principles for Responsible Investment. (2012). About us. Retrieved February 22, 2012, from http://www.unpri.org/about/.
- Useem, M. (1996). Investor capitalism: how money managers are changing the face of corporate America. New York: Basic Books.Google Scholar
- Wilmington, (2008). Pension funds and their advisers, AP information services. London: Wilmington Publishing & Information Ltd.Google Scholar