Benjamin J. Richardson

Being Virtuous and Prosperous: SRI's Conflicting Goals

Can SRI be a means to make investors both virtuous and prosperous? This paper argues that there can be significant tensions between these goals, and that SRI (and indeed all investment) should not allow the pursuit of maximizing investment returns to prevail over an ethical agenda of promoting social and economic justice and environmental protection. The discourse on SRI has changed dramatically in recent years to the point where its capacity to promote social emancipation, sustainable development and other ethical goals is in jeopardy. Historically, SRI was a boutique sector of the market dominated by religious-based investors who sought to invest in accordance with the tenets of their faith. From the early 1970s, the aspirations of the SRI movement morphed significantly in the context of the divestment campaign against South Africa’s apartheid regime. No longer were social investors satisfied with just avoiding profit from immoral activities; instead, they also sought to change the behavior of others. Business case SRI is a problematic SRI benchmark for several reasons: often there is a countervailing business case for financing irresponsible activities, given the failure of markets to capture all social and environmental externalities; secondly, even if investors care about such concerns, there may be no means of financially quantifying their significance for investment purposes; and, thirdly, even if such factors can be financially quantified, they may be deemed to be such long-term financial costs or benefits that they become discounted and ignored. The ethics case for SRI and ethical business practices more generally takes the view that both investors and the companies they fund have ethical responsibilities that trump the pursuit of profit maximization. Ethical investment should be grounded on this foundation. However, it may not be enough. To keep ethical investment ethical will likely require institutionalizing new norms and governance standards, in such domains as reforming fiduciary duties and the internal governance of financial organizations. SRI’s own codes of conduct including the UNPRI have yet to demonstrate the robustness to move the financial community beyond business as usual.

What Ever Happened to Canadian Environmental Law

This Article examines the history of Canadian environmental law in order to explain why it has become a laggard in both legal reform and environmental performance. Canadian environmental law has long been of interest to scholars worldwide, yet its record is often poorly understood. The Article contrasts recent developments with the seemingly progressive initiatives of the 1970s, and analyzes these trends in light of their political, economic and governance context, as well as the wider critiques of environmental law. It argues that there is considerable room for Canadian governments to adopt more robust methods of environmental law, including following pioneering reforms advanced in other countries. However, even with such steps, further environmental degradation might not be averted unless Canadians are prepared to accept more fundamental changes to their economic systems and social values.

Company law and sustainability : legal barriers and opportunities

List of contributors Foreword Preface 1. Capitalism, the sustainability crisis and the limitations of current business governance Benjamin J. Richardson and Beate Sjafjell 2. Corporate social responsibility and environmental sustainability David Millon 3. Shareholder primacy: the main barrier to sustainable companies Beate Sjafjell, Andrew Johnston, Linn Anker-Sorensen and David Millon 4. The role of board directors in promoting environmental sustainability Blanaid Clarke 5. Accounting, auditing and reporting: supporting or obstructing the sustainable companies objective? Charlotte Villiers and Jukka Mahonen 6. Financial markets and socially responsible investing Benjamin J. Richardson 7. Limits to corporate reform and alternative legal structures Carol Liao 8. The future for company law and sustainability Beate Sjafjell and Benjamin J. Richardson Index.

Socially Responsible Investing for Sustainability: Overcoming its Incomplete and Conflicting Rationales

In the wake of the Global Financial Crisis and worsening collateral social and environmental problems, socially responsible investing (SRI) has garnered more interest internationally as a potential civilizing influence on the financial economy. In particular, SRI is increasingly conceptualized as a means to promote environmentally sustainable development by disciplining financial markets to be more attentive to their ecological impacts. In this sense, SRI emerges as a putative form of transnational governance that utilizes non-state actors and mechanisms to promote sustainability in an economic sector that traditionally has had little accountability for its environmental performance. But as a largely voluntary movement, with rudimentary legal support, SRI so far has wielded limited clout. A hindrance to the aspirations of SRI is deficiencies in its rationales. This article critiques the main theories advanced to justify SRI from the perspective of their contribution to promoting environmental sustainability: the complicity-based doctrine, leverage-based responsibility, and the universal owner thesis. Apart from gaps or limitations shown in each rationale, the article demonstrates that they conflict with the existing parameters of fiduciary law responsibility of financial institutions. An alternative rationale that emphasizes the temporal perspective to invest over the long term is suggested as a better approach for SRI if it is to be relevant to the pressing challenges of promoting sustainability and governing global financial markets.

Fiduciary Law and Responsible Investing: In Nature’s Trust

This book investigates fiduciary law’s influence on the financial economy’s environmental performance. It focuses on how the law affects responsible investing and considers possible legal reforms to shift financial markets towards sustainability. Fiduciary law governs how trustees, fund managers and other custodians administer the investment portfolios owned by beneficiaries. Written for a diverse audience, not just legal scholars, the book examines in a multi-jurisdictional context an array of philosophical, institutional and economic issues that have shaped the movement for responsible investing and its legal framework. Fiduciary law has acquired greater influence in the financial economy in tandem with the extraordinary recent growth of institutional funds such as pension plans and insurance company portfolios. While the fiduciary prejudice against responsible investing has somewhat waned in recent years, owing mainly to reinterpretations of fiduciary and trust law, significant barriers remain. This book advances the notion of ‘nature’s trust’ to metaphorically signal how fiduciary responsibility should accommodate society’s dependence on long-term environmental well-being. Financial institutions, managing vast investment portfolios on behalf of millions of beneficiaries, should manage those investments with regard to the broader social interest in sustaining ecological health. Even for their own financial self-interest, investors over the long term should benefit from maintaining nature’s capital. We should expect everyone to act in nature’s trust, from individual funds to market regulators. The ancient public trust doctrine could be refashioned for stimulating this change, and sovereign wealth funds should take the lead in pioneering best practices for environmentally responsible investing.

A Damp Squib: Environmental Law from a Human Evolutionary Perspective

Humans have become the Earth’s dominant animals, yet we remain perched on the precipice of an anthropogenic collapse in planetary ecological systems. For lawyers, this raises a question: why hasn’t environmental law succeeded? The law’s limitations in this area cannot satisfactorily be explained merely due to poorly designed institutions, lack of political will, or economic disincentives, among prevalent explanations in the literature. Rather, its flaws should also be understood in terms of human psychology, as derived from the interaction of complex biological and cultural evolutionary processes. While some legal scholars have drawn insights from behavioural economics or social psychology, few have examined the deeper evolutionary perspective. Our environmental behavior is influenced by what our ancestors have done over thousands of years. But behaviors that were adaptive in ancestral environments can today be irrational or maladaptive, including risk-taking, myopia, and lack of extended altruism. Using insights from evolutionary psychology may also help us to design more behaviourally-effective environmental laws to stave off the impending environmental crisis.

The Evolving Marketscape of Climate Finance

An important dimension of international and national climate governance is the financial sector. Climate finance refers to the role of financial institutions in addressing climate change, such as through investment transactions, identifying financial risks and supporting clean and green energy developments. Global financial markets have become a significant driver of environmental pressure, but also potentially a means of leveraging positive change. The latter role is expressed through the growing movement for socially responsible investing (sri). This article examines how the financial industry affects action on climate change, the role of the sri movement in improving environmental behaviour, and the place of state-based regulation in creating a more conducive “marketscapeˮ for climate finance.

Fiduciary Responsibility in Retail Funds: Clarifying the Prospects for SRI

This article assesses the fiduciary law context governing socially responsible investing (SRI) in retail funds in order to understand the scope for promoting sustainable development. Most scholarship on this subject has focused on institutional investors such as pension plans, yet the legal, institutional and market context of retail funds has some distinct characteristics. The article argues that although the retail sector offers the most generous legal space for SRI of any financial sector, SRI practice is far from mainstream owing to a range of organizational and economic impediments coupled with the drawbacks of a relatively permissive legal milieu. This article highlights that the obsessive focus on the supposed fiduciary law barrier to SRI can overlook other institutional obstacles to its practice, as well as to stress that it is insufficient merely to have a legally enabling framework if we wish SRI to make a more fundamental contribution to sustainability. Furthermore, any analysis of the fiduciary responsibility of retail funds is incomplete without taking into account the impact of other legal standards and duties in this sector such as from contract law and financial regulation.

SRI and extractive industries

This special edition of the Journal of Sustainable Finance and Investment examines one of the most controversial economic sectors for social investors and lenders – the mining, oil and gas industries. These non-renewable, extractive industries pose a wide array of social and environmental impacts, including greenhouse gas emissions, soil and water pollution, degradation of wildlife habitat, and displacement of indigenous peoples and other local communities. In countries such as Canada, where the extractives sector is particularly economically significant, social investors cannot easily create a diversified investment portfolio if they exclude mining, oil and gas companies. Alternatively, reliance on corporate engagement as a means of improving industry practices may be problematic when the targeted business is perhaps intrinsically environmentally unsustainable, as some view the petroleum sector. This edition of the journal addresses some of these and other issues through four articles derived from a Canadian workshop on SRI and the Extractive Industries that was organized by the University of British Columbia Faculty of Law and the Canadian Business Ethics Research Network. The workshop featured one dozen presentations from a range of stakeholders and perspectives, including academics, lawyers, aboriginal peoples and investment and industry professionals from across Canada – a country with one of the world’s largest mining sectors, and with a significant multinational presence through Goldcorp and Barrick Gold and other global mining behemoths. The articles in this special edition offer case studies that collectively offer a diversity of theoretical, empirical and practical perspectives about the methods, goals and impact of socially responsible investment (SRI) in the extractives sector. Several articles focus on corporate engagement by investors. Rupert Allen, Hugues Létourneau and Tessa Hebb, in their article on ‘Shareholder Engagement in the Extractive Sector’, assesses the results of engagement at the level of the individual firm, examining engagements by Northwest and Ethical Investments with Barrick Gold from 2005 to 2009. Their research points to the ability of shareholder engagement through dialogue to raise corporate standards and suggests that the legitimacy of the stakeholder remains the dominant force in fostering successful engagement. Rupert Allen is an economist with the Government of Canada and a research associate with the Carleton Centre for Community Innovation (CCCI). Hugues Létourneau works as a research assistant with the CCCI while completing his Master studies at Carleton’s Norman Paterson School of International Affairs. Dr Tessa Hebb is the Director of the CCCI at Carleton University, and she has researched extensively the financial and extra-financial impact of pension fund investment in Canada and internationally. Jackie Cook’s article, titled ‘Political Action through Environmental Shareholder Resolution Filing: Applicability to Canadian Oil Sands?’, assesses corporate engagement at a different level, through investor-driven governance networks and shareholder activism that aims not only to shape the behaviour of individual companies, but also to influence the public policy and regulatory agenda in order to spur more systemic changes. These strategies are examined through case studies of two shareholder campaigns in the United States: one organized by Ceres (Coalition for

Climate Law and Developing Countries

With contributions from over 20 international scholars from developing and developed countries, the book tackles both long-standing concerns and current controversies. It considers the positions of developing countries in the negotiation of a new international legal regime to replace the Kyoto Protocol and canvasses various domestic issues, including implementation of CDM projects, governance of adaptation measures and regulation of the biofuels industry.