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Socially Responsible Investing for Sustainability: Overcoming Its Incomplete and Conflicting Rationales

Published online by Cambridge University Press:  13 August 2013

Benjamin J. Richardson
Benjamin J. Richardson*
Affiliation:
Faculty of Law, University of British Columbia, Vancouver, BC (Canada), and Macquarie University Law School, Sydney, NSW (Australia). Email: [email protected].
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Abstract

In the wake of the Global Financial Crisis and worsening collateral social and environmental problems, socially responsible investing (SRI) has garnered more interest internationally as a potential civilizing influence on the financial economy. In particular, SRI is increasingly conceptualized as a means to promote environmentally sustainable development by disciplining financial markets to be more attentive to their ecological impacts. In this sense, SRI emerges as a putative form of transnational governance that utilizes non-state actors and mechanisms to promote sustainability in an economic sector that traditionally has had little accountability for its environmental performance. But as a largely voluntary movement, with rudimentary legal support, SRI so far has wielded limited clout.

A hindrance to the aspirations of SRI is deficiencies in its rationales. This article critiques the main theories advanced to justify SRI from the perspective of their contribution to promoting environmental sustainability: the complicity-based doctrine, leverage-based responsibility, and the universal owner thesis. Apart from gaps or limitations shown in each rationale, the article demonstrates that they conflict with the existing parameters of fiduciary law responsibility of financial institutions. An alternative rationale that emphasizes the temporal perspective to invest over the long term is suggested as a better approach for SRI if it is to be relevant to the pressing challenges of promoting sustainability and governing global financial markets.

Keywords

Financial MarketsGovernanceInstitutional InvestorsSustainabilitySocially Responsible InvestingFiduciary Law
Type
Articles
Information
Transnational Environmental Law , Volume 2 , Issue 2 , October 2013 , pp. 311 - 338
Copyright
Copyright © Cambridge University Press 2013 

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