Responsible investment is moving from being a niche in the asset management universe to increasingly becoming mainstream. In Europe, especially, it appears to be taking off. This article identifies some of the key drivers and the challenges that responsible investment poses to investors and managers as they try to take this novel field and embed it into their institutional practices.
Looking to the future, the author highlights three areas that he believes will need close attention: new financial strategies to deal with problematic industries; the role of Chief Sustainability Officer will become increasingly strategic; and the transparency requirements being demanded for public companies will need to apply to private ones, too, otherwise the diffusion of these practices will only be partial and their impact greatly reduced. Though much remains to be done, the author believes this is an opportune moment for institutionalizing responsible investment and ushering in a new, more sustainable age of capitalism.
Based on research by the author on the emergence of responsible investing in mainstream financial markets, which is supported by a five-year grant (2011-2015) from the European Research Council as well as a study on the institutionalization of the Global Reporting Initiative, published in Organization Science.
You can read the complete article by Prof. Fabrizio Ferraro in the IESE Insight magazine.