I am attending the Law and Society meeting in Denver at the end of May. I hope to get comments on one of the papers I am presenting. It is tangential to my main research but close to my heart. The thesis is this: Socially responsible investment theories detrimentally affect developing world companies. This requires some explanation.
To begin with, popular investment theories influence the investment decisions of pension managers. Pension managers, more so before the global economic crisis than after, oversee large pools of investment monies. Increasingly, pension mangers are expressing their political ideals by their investment decisions. They avoid ‘bad’ companies and invest in ‘good’ ones. The company they refuse to invest in may reside in the developing world. At the same time, there is a movement to encourage private investment in the South. Can these two ideals be reconciled?
There currently exist notions of sustainability, the green agenda, corporate social responsibility (CSR) and socially responsible investment (SRI), that somehow conflate to form a political movement. They produce public pressure, as well as legislative pressure, to recycle AND to consider these notions when making investment decisions. As a matter of fact, in the UK, this has become pension law. Pension managers must state how and if they consider CSR when making investment decisions. How does all of this affect the developing world?
A UNIDO report says it has a detrimental effect. CSR, as a measurement of corporate appropriateness, creates obstacles for small to medium enterprises (SME) in the developing world. Small budgets do not allow SME's to appear, or indeed BE, socially responsible and profitable. There are shareholders and creditors supporting a company that will return their investment. Who should prevail?
CSR and concepts of sustainability , when employed in the business world, are:
· Ill-defined, yet used permissively,
· Frequently politically hijacked,
· Can be expensive to comply with, and
· Are morally infused.
All of the above give an advantage to media and internet savvy, multi-national corporations, eager not to be regulated, who have developed industry standards to be followed. These are competitors setting standards for everyone.
Save the planet for sure. Don’t do it at anyone’s expense. And do NOT claim you are helping the developing world by imposing impossible obstacles for access to the few existing ladders out of poverty.
See, Peter Raynard, and Maya Forstater, Corporate Social Responsibility: Implications for Small and Medium Enterprises in Developing Countries, UNIDO Report. Vienna 2002
See, Russell Sparkes, Socially Responsible Investment: a Global Revolution, (
See also, Richardson, Benjamin, Do the Fiduciary Duties of Pension Funds Hinder Socially Responsible Investment? Banking and Finance Law Review 2007 (22(2) 145-201