Investor views, investment screen use, and socially responsible investment behavior

Abstract

Purpose

Despite the increasing demand for socially responsible investments (SRIs) and the importance of information intermediaries in providing corporate social responsibility (CSR) performance information through SRI screens, relatively little is known about the relationship between nonprofessional investors’ views regarding SRI, their use of SRI screens and their actual SRI behavior. This study aims to distinguish between investor views about the importance of corporate environmental responsibility (environmental performance importance views) and whether they view environmentally responsible firms as yielding higher returns (environmental performance return views). It examines the association between these views, SRI screen use and reported SRI holdings.

Design/methodology/approach

Nonprofessional investor participants completed an online survey about their SRI investment views, screen use and investment behavior. The survey yielded 201 usable responses.

Findings

The strength of participants’ environmental performance importance and environmental performance return views is positively associated with their use of SRI screens and the proportion of their portfolios held in SRIs. SRI screen use only partially mediates the association between investors’ environmental performance importance and return views and their SRI holdings.

Research limitations/implications

The study does not precisely address what types of SRI screens nonprofessional investors may be using. It does not control for investors’ specific experience with SRIs, nor does it examine how or why investors come to believe that environmental responsibility may improve a company’s return potential.

Practical implications

The fact that SRI screen use only partially mediates the association between investors’ views and their SRI holdings suggests that either reliable, unfiltered CSR information is important for nonprofessional investors or some investors are choosing SRIs without obtaining adequate relevant information.

Social implications

The study’s findings confirm earlier research findings which show an association between investors’ pro-environmental views and their decision to invest in SRIs (Williams, 2007; Nilsson, 2008) and suggest that nonprofessional investors are becoming aware of the positive relation between environmental performance and firm value (Dhaliwal et al., 2011; Clarkson et al., 2013; Hawn et al., 2014; Matsumura et al., 2014).

Originality/value

This study simultaneously examines the influence of environmental performance importance (an “alternative” investment perspective) and environmental performance return (a “traditional” investment perspective) on investors’ SRI behavior.

Citation

Dilla, W., Janvrin, D., Perkins, J. and Raschke, R. (2016), "Investor views, investment screen use, and socially responsible investment behavior", Sustainability Accounting, Management and Policy Journal, Vol. 7 No. 2, pp. 246-267. https://doi.org/10.1108/SAMPJ-07-2015-0066