Ben Jacobsen

Increasing the effectiveness of SRI corporate engagement on climate change through a responsive regulation framework

Abstract Purpose Socially responsible investment (SRI) engagement currently performs a variety of supportive regulatory functions such as reframing norms, establishing dialogue and providing resources to improve performance, however corporate responses are voluntary. This chapter will examine the potential gains in effectiveness for SRI engagement in a responsive regulatory regime. Approach Global warming is a pressing environmental, social and governance (ESG) issue. By using the example of climate change the effectiveness of SRI engagement actors and the regulatory context can be considered. This chapter builds the conceptual framework for responsive regulation of climate change. Findings SRI engagement may face resistance from corporations due to its voluntary nature and conflict with other goals. Legitimacy and accountability limit the effectiveness of SRI engagement functioning as a voluntary regulatory mechanism. This chapter argues that the effectiveness of SRI engagement on climate change could be enhanced if it served as part of a responsive regulation regime. Practical implications Engagement is used by SRIs for ESG issues. A comprehensive regulatory regime could enhance corporate adaptation to climate change through increasing compliance with SRI engagement. The implication for SRI practitioners is that lobbying for a supportive regulatory regime has a large potential benefit. Social implications Responsive regulatory policy involves both support and sanctions to improve compliance, enhancing policy efficiency and effectiveness. There are potentially large net social benefits from utilising SRI engagement in a regulatory regime. Originality of chapter In seeking to re-articulate voluntary and legal approaches this research addresses a gap in the literature on climate change regulation.

Is Earnings Quality Associated with Corporate Social Responsibility

Socially responsible investment researchers have searched for effects between environmental, social and corporate governance (ESG) factors and financial performance, most often using fund returns compared with mainstream funds. The critical perspective indicates caution on relying on financial markets to influence corporate social responsibility (CSR) (Haigh and Hazelton 2004). For example, the success of institutional investor engagement on ESG issues depends upon the values of managers (Gifford 2010). Thus this research, in focussing on evidence of the effect of CSR performance on internal decisions such as earnings manipulation, will be of broad interest to social and environmental accounting researchers. By investigating the ethical dimension and its potential association with financial reporting, the paper makes a substantial contribution to the debate on whether ethics is correlated with corporate performance. Practical interest in the findings, as the paper notes, should come from regulators who may be concerned by a lack of CSR as a risk indicator for earnings management and manipulation of operating activities. However, the paper does not fully explore the ethical basis of CSR, perhaps not critically important due to the measure (KLD scoring) being a reasonable proxy for environmental, social and governance performance (Sharfman 1996). This gives rise to some interesting research opportunities, such as to investigate the causality of the CSR nexus with earnings quality through longitudinal case studies (which could be selected using methods outlined in the paper). Such research would provide robust evidence of the importance of ethics to financial, social and environmental performance.

Institutional investor support for climate change resolutions: a new challenge to capitalism or co-opted activism?

Purpose: Responsible investor (RI) engagement seeks to change corporate strategic priorities while balancing the financial imperative. This chapter uses an institutional theory framework to explore the tension between financial performance and environmental, social, and governance (ESG) issues in RI engagement. Methodology: Discourse of the proponent, supporters and opponents of Australias first climate change shareholder resolution – a minority proposal, will be analyzed using framing analysis. Findings: Framing indicated that the discourse emphasized the dominant financial performance logic while often omitting the ESG logic. One possible explanation is that the process of shareholder proposal nomination and the financial imperative of investment organizations effectively co-opted the engagement. Research limitations: A case of responsible investment engagement is used to illustrate multiple logics in the investment field. Although there are significant limitations to drawing inferences from a single example, the discussion is relevant to RI support for engagement initiatives such as the UN Principles of Responsible Investment clearinghouse and Carbon Disclosure Project Carbon Action. This chapter argues that attempts to change corporate strategic actions on climate change by RI through engagement will be less effective while the financial performance logic provides relatively more legitimacy to investors. Practical implications: Integrating the ESG logic with the financial logic is vulnerable to co-optation due to incommensurability. Operationalizing both logics requires establishing a boundary between ESG and financial logics to develop legitimacy. Social implications: RI engagement on climate change has the potential to be an important part of the social response to the sustainability agenda. Originality: In applying institutional theory to RI climate change activism this chapter presents original insights into the potential of engagement to effect change.

Policy options for Great Barrier Reef water quality

Ecosystem protection in the Great Barrier Reef Marine Park is a multifaceted problem compounded by susceptibility to land use impacts. Policy to manage diffuse agricultural pollution is required for sustainable natural resource use. Difficulty in measuring individual pollution contributions increases the complexity of policy design. Selected policy options suggested by the Productivity Commission to address fertiliser and chemical use in catchments draining into the Great Barrier Reef are reviewed. Choosing policy options, setting water quality targets, and designing implementation require community participation, primarily because of the location-specific expertise that resides in natural resource management groups.