Content area
Full text
The rise of social investment since the mid-1980s has been one of the astonishing new developments in the financial community. Begun as long ago as the seventeenth century when Quakers wanted to avoid profiting from war, the movement has been supported during the twentieth century by a range of religious groups (see Weigand, Brown, and Wilhem [1996]). By 1971, a coalition of religious institutions formed the Interfaith Center on Corporate Responsibility (ICCR), which was one of the primary activists with respect to the Nestlé infant formula boycott (see Sethi [1979]). Social investing has begun to concentrate as a movement because a growing number of investors now appear to believe that social performance is an important and legitimate investment criterion, although its adherents still represent a relatively small percent of overall investors.
The key questions to be addressed by this study focus on whether companies that score well on social performance measures are 1) accomplishing their goals to treat various stakeholders well; and 2) paying a financial performance penalty.
In the mid-1990s, social investing was estimated by the Social Venture Network and Council on Economic Priorities to encompass more than $600 billion in one or another form of socially screened or activist investment (Pava and Krausz [1996]). This estimate has been more recendy revised at well over $1 trillion. Although other estimates of the extent of social investing suggest that the total amount may be less, it is clear that significant equity investments are now socially screened in one way or another and that investor interest in the social performance of businesses is increasing.
By way of example, in 1997 Smith Barney, one of the leading financial investment houses, began its own social investment fund in recognition of the growing demand by investors for screened investments. Other major institutional investors, such as TIAA-CREF, now offer socially oriented funds as well; TIAACREF's fund is now well over $2 billion,
Social investing is still in a phase of evolution and growth. Following wel -publicized activism around infant formula marketing in lesser developed countries in the late 1970s and early 1980s, social investing gained adherents rapidly during the 1980s when concern surfaced among some institutional investors about investing in companies operating in South Africa under conditions of apartheid (see...