Sub-theme 20: Sustainable Development and Financial Markets: Connections, Pitfalls and Options
Timo Busch, School of Business, Economics and Social Science, University of Hamburg, Germany
Rob Bauer, School of Business and Economics, Maastricht University, The Netherlands
Marc Orlitzky, The Pennsylvania State University, Altoona, USA
Call for Papers
To what extent and how can market processes and institutions foster, encourage, or facilitate business environmental responsibility? This question is a vigorously debated issue with a long history, particularly given the increasing influence of, and research on, sustainable investment. Sustainable investment practices are often called social, ethical, responsible, or socially responsible investing. We understand sustainable investment as generic term to describe investment strategies centered on long-term environmental, social, and corporate governance (ESG) criteria; thus seeking to contribute to sustainable development by integrating investors' financial objectives with restrictions on ecological and social issues or concerns.
In recent years, sustainable investment practices have increasingly gained importance in capital markets. In fact, stock market data show that sustainable investments have reached US$10.6 trillion globally. In addition, according to some industry surveys (e.g., Allianz, 2010), the market is expected to grow further. There seems good reason for this: Epistemological concerns with previous research notwithstanding, the majority of empirical studies indicate that, at a minimum, there seems to be no clear indication for a negative relationship between share price performance and corporate environmental or social performance. One might assume that these trends in financial markets and results of empirical studies lead to a greater focus on sustainable development in business practices.
In reality, however, we can observe a somewhat paradoxical situation. On the one hand, many reasons can be identified as to why equity market participants have shown increasing interest in issues of ecological sustainability, for example from a real options perspective. It seems that sustainability has become a central issue in many industries and firms, and it appears plausible that ESG criteria are increasingly integrated into investment decisions. On the other hand, when considering ecological reality, current global production and consumption patterns seem to have become even more unsustainable, according to several analyses and projections. For example, in 2007 humanity used the equivalent of 1.5 planets to support its activities; by 2030 humanity is projected to require the capacity of two Earths (WWF et al., 2010). As such, many examples can be found which illustrate that, in spite of increasing concerns about environmental and closely related social and governance issues, there has not been a significant global shift towards greater sustainability.
This Colloquium will address this paradoxical situation. We invite theoretical contributions as well as empirical studies, and encourage diverse disciplinary and interdisciplinary perspectives:
- How effective are contemporary sustainable investment practices in terms of their contribution to sustainable development? How are these sustainable investing practices affected by the financial crisis?
- How can different (economic, sociological, psychological, etc.) theories of equity market participants' decision making, business cycles, and aggregate market dynamics inform the debate on sustainable development and financial markets?
- How, if at all, do sustainability-oriented institutional logics influence investor choices and corporate finance decisions? In general, what is the impact of sustainable investing?
- To what extent do the trends in sustainable investing require or cause changes in corporate governance structures?
- What are some firm-internal preconditions for more successful business positioning vis-à-vis sustainability-oriented investors?
- What theoretical perspectives or typologies can be identified for different investment styles, and what do they imply for efforts seeking to foster sustainable business practices? For example, what is the role of "impact investment”?
- What are individual and/or institutional investors' expectations about sustainable development, and how do these expectations affect their investor behaviors?
- What are the myths and realities of sustainable investing? What are the measurement challenges inherent in ESG data?
- How can ESG criteria best be applied to other asset classes beyond publicly traded securities (e.g., corporate bonds), and how may possible barriers be overcome?
Allianz (2010): Doing good by investing well? Pension Funds and Socially Responsible Investment: Results of an Expert Survey. Munich, Germany (www.allianzglobalinvestors.com).
WWF, Zoological Society of London & Global Footprint Network (2010): Living Planet Report 2010 – Biodiversity, Biocapacity and Development. Gland, London, Oakland: Worldwide Fund For Nature.
Timo Busch is Professor at the School of Business, Economics and Social Science, University of Hamburg, Germany, and Lecturer at the Duisenberg School of Finance, The Netherlands. His research interests include corporate strategies towards a low-carbon economy, corporate eco-efficiency, and the business case for corporate environmental sustainability.
Rob Bauer is Full Professor of Institutional Investors at the School of Business and Economics at Maastricht University, The Netherlands. His research into the field of sustainability and corporate governance resulted in the establishment of a new research institute: the European Centre for Corporate Engagement (ECCE). Further details can be found on http://www.fdewb.unimaas.nl/hoogleraren/default_en.asp?mode=single&userid=25
Marc Orlitzky is Associate Professor of Management at Penn State University, Altoona, PA, USA. More biographical details and research projects can be found on his personal website: http://marcorlitzky.webs.com