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

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 European Commission (EC) for a greener and cleaner economy.

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 review of 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 management for achieving sustainability goals.

Originality/value

This study reveals how SRI theory and practice neglect the importance of NFI. The presented ESRI perspective enables scholars to examine SRI practices more holistically through a new theoretical lens. One special focus is on the role of SRI fund management as a transmission mechanism to push portfolio companies’ business practices toward more sustainable behavior.

Citation

Diener, J. and Habisch, A. (2021), "A plea for a stronger role of non-financial impact in the socially responsible investment discourse", Corporate Governance, Vol. 21 No. 2, pp. 294-306. https://doi.org/10.1108/CG-01-2020-0039