Matthew Haigh

Incorporating sustainability into accounting curricula: Lessons learnt from an action research study

This paper chronicles the journey of two projects that sought to incorporate principles of sustainable development into predominantly technical postgraduate accounting curricula. The design and delivery of the projects were informed by Freirian principles of praxis and critical empowerment. The first author introduced sustainability-related material into a core technical accounting unit and created an elective unit. The second author participated with students to evaluate critically social reports of employers, current and potential. In terms of an objective of bringing reflexivity into the classroom, both projects were marked by some success, but efforts to create permanent curriculum change were hampered by the predominantly vocational orientation of student cohorts. In addition, the traditionally technical focus of the professional bodies and competing educational reform agendas (such as vocational skills) add to the difficulties for sustainability in penetrating already overcrowded curricula.

What Counts in Social Managed Investments: Evidence from an International Survey

Despite speculation from legislators and practitioners, no studies have investigated the reasons for social funds’ marginal market penetration. More generally, calls for a greater understanding of investors’ motivations, needs and purchasing intentions have not been met. By identifying what attracts consumers to social mutual funds and the information-processing difficulties consumers face when considering a purchase, this paper claims to make a meaningful contribution to the literature on social investment and mutual funds. In 2004 an Internet questionnaire survey attracted 382 interested, current and former social investors from Australasia, North America and Europe. The questionnaire measured motivations to invest in social funds and attitudes towards information sources and selection criteria. A restricted data set was used to test a set of propositions relating to respondents’ investment intentions and information asymmetries. Results were largely as expected. Respondents were attracted to social funds from moral conviction and from desires to influence corporate behavior. One in two respondents had chosen not to invest on the basis of informational concerns. Unexpectedly, social investment styles, portfolio listings and perceived accuracy of information were considered more important to an investment decision than management expenses. Findings underline a need for careful product design and management.

Managed investments, managed disclosures: financial services reform in practice

Purpose – Recently enacted Australian law governing financial services requires investment managers to report to what extent social considerations are employed in portfolio construction. Using the principal-agent framework as an interpretive backdrop, the paper aims to analyse institutional responses to the introduction of the legislation. Design/methodology/approach – The paper distinguishes formal, claimed accountabilities from practised accountabilities. It identifies practised accountabilities by examining legislative requirements, noting responses of mainstream investment banking institutions in the period of legislative development, interviewing a sample of investment managers, and examining a sample of information disclosures issued in the initial period of the legislation. Findings – The paper finds that while appeasing investment managers and the lobby group that urged for the disclosures, the non-prescriptive regulations promise little in terms of promoting the integrity of management practices. Initial disclosures were poor, providing little basis for comparability. Research limitations/implications – The paper provides a basis to investigate accountabilities in service-based contractual relationships, particularly managed investments. Originality/value – The paper introduces a new research field: social reporting in financial services. The period reviewed was the initial reporting period in which Australian practitioners were required to issue social reports. Counterpart European legislation has not attracted scholarly attention. A contribution is made to critical research on social investment.

Climate policy and financial institutions

This article examines how financial institutions, such as pension funds and insurance companies, have interpreted and used UN-issued climate change management policies. A critical discourse approach is used to analyse material issued by the United Nations Framework Convention on Climate Change, the World Bank Group and some business and investment consultancies, with interview data supplementing the document analysis. It is argued that although policymakers and business consultants have been eager to appropriate the discourses of financial services, they have not produced guidance on how the outputs of climate science might best be used to allocate managed capital. In terms of outcomes, financial services remain on the periphery of policy implementation, attention has been deflected from the emitters of greenhouse gases, and policy objectives have been frustrated. By unspoken fiat, the market is here the new truth that cannot be contradicted.

Camouflage play: Making moral claims in managed investments

Abstract The paper claims theoretical, empirical and normative contributions to the fledgling research on social accountabilities in financial services. Managers of managed (mutual) funds with public social mandates are obligated to pursue clients’ economic interests and exercise claimed moral considerations. Theoreticians working in post-modern accounting are invited to examine alignment difficulties. Guidance is offered in the form of Foucault’s resigned response to Nietzsche’s moral cynicism. Theoretical antagonisms are empirically illustrated in interviews with managers of social investment portfolios, comparisons of the portfolios of selected Australian social funds with conventional counterparts, and comparisons of selected investment decisions with claimed investment criteria in a sample of Australian social funds. Research has suggested that a recognisably distinct management bias in Australian socially screened investment products may have diffused into the investment styles adopted by managers of conventional unscreened products. The paper suggests that performance convergence might also be attributable to similar stock holdings. The requirement to sustain competitive economic performance renders the use of moral considerations in managed funds as camouflage play. A number of investment policy innovations are suggested that might serve to increase net fund inflows and so bring closer the objective of social investment to transform capital.

Publishing and defining sustainable finance and investment

Provides an overview of the aims and scopes of journals and magazines publishing the outcomes of responsible investment research. Discusses interconnected terms such as responsibility, sustainability, ecology, financing and investing.

Connecting sustainability goals to financing activity

The articles in this issue of Sustainable Finance address the relations of financing activity with sustainability goals. In providing an introduction to the issue, two aspects of sustainable finance deserve prefatory mention. Initially, the various aspects by which sustainability goals connect to financing activity demand consideration. We can then consider the different strands of research in sustainable finance. Sustainable finance can seem cynical, impractically hopeful and entirely sensible – all at the same time. The cynical perspective is if sustainable finance is thought of as green capitalism. If so, sustainable finance becomes, at most, a way to deal with collective guilt that the global financial system is neither humane nor just. Connecting sustainability to finance is hardly about maintaining the status quo. Rather, sustainability in respect of financing activity is about addressing predatory lending practices and exploitative investments. The hopeful aspect is if sustainable finance is treated as an imperative, not a nice-to-have but an essential attribute of a financial system. In these troubled financial times, one hears and participates in talk of sustainable financial architecture and getting back to a secure financial footing, and usually in the context of financialization. Financialization has become a dominant feature of the global political economy. Financialization describes the exposure of companies to financial instruments; of banks mediating in financial markets and of individuals becoming exposed to financial markets via housing debt and through their pensions. In such an unavoidable context, what does and can sustainable finance aspire to? A useful attempt at an answer can be found in adaptive systems theory. Based on relationships, emergence, patterns and cycles, adaptive systems theory first identifies system components within an institutional context; identifies direct and indirect relationships between system components; and then examines whether the components are good for purpose. Understanding sustainable finance using an adaptive systems approach means to consider its context, activity, scale and distributive capacity. Finance is understood as various sets of complex activities, operating on many levels, and in the context of the complex behaviour of policymakers, regulators, companies and stock exchanges, employers, educators, media and so on through the entire political economy. Sustainable finance can mean the well functioning (oikos) of ecosystems and the society in which a financial system operates, as well as the actual systems of globalized finance. Relevant issues become the relations of finance and climate change and fuel security; finance and biodiversity threats; and finance and inequality. Sustainable finance can also mean resilience – the ability of economies to protect jobs and livelihoods and avoid collapse in the face of external shocks. Sustainability, of course, has modernist roots in development, which means that sustainable finance as a meaningful category relies on what finance does, on the activity of financing. What is the appropriate scale of sustainable finance? Does sustainable finance refer to addressing the massive levels of social risk that capital markets produce? Or does sustainable finance refer to workers’ increased borrowing for housing, and expanding financial assets, e.g., held

Deconstructing myth: low-carbon sustainability

Informed by a semiotics that directs attention to the context of the message, this paper contributes to work on the meanings of terms such as “low-carbon”, “green”, and “sustainability”. Interview-based evidence and printed material are used to assess the interest of hundreds of financial institutions in data on carbon emissions levels and environmental projects. The collection of such data is where for most interviewees its usefulness stopped. Such is typical of myth. By collecting carbon data, financial institutions can connote they are doing something about addressing the risks posed by global warming, without actually describing what it is they are doing.

Activism in European Pension Funds: Exerting Pressure on Intermediaries

Grahl (2006) has commented that current manifestations of institutional shareholder activism are limited by the rise of the shareholder value doctrine in EU member states and the absence of strong legal frameworks restraining corporate practice. Survey studies have pointed to a generally muted response to legislative encouragement that financial institutions engage in reformist activist practices. Several studies have attempted to measure the effect of legislation calling on financial institutions to disclose the extent of their involvement with companies in which they have invested. All such studies have concluded that strong shareholder activism policy would require adjustments to the manner of remuneration of investment managers and intermediaries. For example, a study of pension fund reporting immediately following the introduction of British legislation in 2000 found that most surveyed organisations had disclosed the use of ‘social considerations’ in investment processes (Mathieu, 2000), with little more added by way of elaboration. (The latter observation is also couched a high non-response rate (67 per cent).) More recent studies demonstrate the struggle of pension funds in this regard. Pension funds have tended to follow conservative ‘hands-off’ ownership strategies, whereas activist approaches typically require a very different ‘hands-on’ approach (Johnson & De Graaf, 2009; Eurosif, 2010).

Finance and ethics

This issue of the Journal of Sustainable Finance & Investment contributes to the Journal’s aim to make a sustained critique of mass investment culture. Drawing upon examples across the globe, all the articles interrogate the turn towards notions of broader ethics and widened responsibility in the financial sector. Collectively, the articles cast a hopefully useful question on the notion that we can finance our way to a more ethical, sustainable future by merely improving the lines of communication between elected governments, financial institutions and non-financial companies. Mervelskemper et al.’s Are Sustainable Investment Funds Worth the Effort? ponders the latter question from a sharp economic basis. Their results suggest that in times of systemic instabilities, equity markets offer a safe haven for financial institutions. Peylo and Schaltegger’s An Equation with Many Variables: Unhiding the Relationship Between Sustainability and Investment Performance identifies the complexity of efforts to produce observable sustainability outcomes while clearing portfolio hurdle rates as set in investment mandates. Nikolaou’s A Framework to Assist the Financial Community in Incorporating Water Risks into Investment Decisions proffers a possible mechanism to bridge investment short-termism – an ideology that has perpetuated in capital markets – and the ‘inconvenient truth’ of global environmental crises. Ontological complexities only multiply in the case of the state-as-investor and countries as (almost) a type of asset class. Hill Clarvis’s Towards a New Framework to Account for Environmental Risk in Sovereign Credit Risk Analysis takes up with responsible investment at the level of international relations. It seems that contemporary tendencies to economize, privatize and financialize the public domain dialectically produces tendencies to moralize nation states and markets in general, and financial enterprises in particular. Public responses to the global financial crises of 2007 and 2008 demonstrate beliefs that financial intermediation, despite its manifest profligacy, deserves to perform a productive function in capitalist economies. Dragos’s An Ecological/Evolutionary Study of High Frequency Trading identifies some of the institutional hurdles that face that vision. Calderon’s Dilemma of Sustainable Lending identifies a further formidable set of institutional hurdles in commercial lending practices to SMEs. Ethical responsiveness perhaps has a more solid footing in disintermediated finance, as Saeed suggests in A Cross-Country Analysis to Investigate the True Role of Microfinance Institutions in Developed and Developing Economies. Taken together, the articles in this issue explore how the politically potent perception of finance as ethically responsive and socially productive has come to achieve the hegemony that it now enjoys. As Shamir (2008) has suggested in this context, a question that remains is whether the moralization of markets further sustains neo-liberal visions of civil society, citizenship and responsible social action.