Investors on the other hand are increasingly looking to integrate Environmental, Social and Governance (ESG) metrics into their management portfolio for improved decision making, enabling them to minimize risks and maximize returns over the long-term. These investors include institutional pension funds, sell-side analysts, hedge funds, endowment foundations, banks, insurance firms, credit rating agencies and retail investors. Recent years have seen a surge of investor interest in integrating ESG information into financial analysis and investment decision-making. Signs of this trend include continued growth in the volume of managed assets that incorporate ESG research. According to data collected by the Global Sustainable Investment Alliance, ESG investment strategies, broadly defined, currently account for $22.9 trillion in managed assets worldwide, up from $13.3 trillion in 2012 2 . Increase in ESG information providers, ESG information gathering
environmental and corporate governance issues. Originally, Socially Responsible Investing (SRI) applied only to the public equity sector and was about negative screens: avoiding companies that behaved poorly (apartheid) or made ‘bad things’ (like tobacco products, bombs, alcohol, etc.) Such screens were believed to limit the available universe to the ‘good’ companies by restricting the potential investable universe to a smaller set, resulting in higher tracking error against benchmarks, and potentially lower returns. Recent studies* of 18 years of SRI index performance indicate neither a negative nor positive alpha from SRI screens: the long term returns are competitive.
The transition of global financial markets towards investment models that incorporate environmental and social dimensions is now well underway. This paper discusses the evolution of contemporary responsible investment (RI) and its relationship to sustainable development and environmentalsocialgovernance (ESG). In the conception of ESG presented here, various well-known institutional arrangements, most notably interest representation, accountability and transparency, decision-making, and implementation are linked to the structures and processes of governance. Using a hierarchical framework of principles, criteria and indicators (PC&I), the paper presents a means for evaluating RI by way of an analysis of stakeholder perceptions regarding the sector’s governance quality. It concludes with some observations on the challenges confronting RI, notably the need for universally consistent quality of governance standards.
environmental, social, governance and viability KPIs be acceptable and respected by mainstream financial analysts and investors. If we link this aspect to the fact that companies already partially use some of the presented KPIs in their extra-financial reporting – however in a heterogeneous manner – it is to anticipate that the frame- work provided by the DVFA will generously serve the business community in deliver- ing qualitative information in a generally accepted manner. This in turn benefits financial investment professionals as they can make better grounded decisions easier. Another typical feature of the KPIs developed by the DVFA is that they leave open room for corporates to set benchmarks: for instance, it is recommended that firms not only disclose their own performance, but put this into context by additionally present- ing relational benchmarks (external references such as industry-related averages, data from peers, etc.) to the reported line items. This, however, raises questions concerning the procurement of the respective information. Where and how is such information to be obtained? Furthermore, does such effort also entail spending extra-resources? Additionally, recommendations encouraging businesses to selectively disclose on those Applied KPIs which suit them best points to an adaptable approach. At the same time this raises doubts concerning corporate readiness for disclosure on sensitive matters given the handy option to simply avoid suchlike. Practically, this may hamper rigorous comparability, as companies are allowed to report different parameters under the same Master KPI. Such wide discretion then again bares an essential benefit considering the voluntary character of the DVFA framework as typically excessively restrictive re- quirements bring prejudice on a voluntary initiatives’ wide adoption.
51 VEPA, Guidelines fo r Running a Community Liaison Committee (Publication 740, VEPA, 2001) p 5. 52 For example: John D and Mlay M , “Community-Based Environmental Protection: Encouraging Civic Environmentalism” in Sexton K, Marcus A, William Easter K and Burkhardt T (eds), Better Environmental Decisions Strategies fo r Governments, Businesses and Communities (Island Press, 1999) p 362-363; John, n 47, p 230-242; Freeman J and Farber D , “Modular Environmental Regulation” (2005) 54 Duke Law Journal 795 at 890. 53 In NEIP this proposal and planning process will generally involve meeting a number of broad steps , including the community and sponsor drawing a “neighbourhood boundary” around an issue; identifying where the problems are, and what the possible solutions may be; engaging and obtaining formal sign-on of so called NEIP “partners”; establishing a steering committee made up of key partners; conducting a process of community consultation; determining a “vision” for the neighbourhood; determining how the vision may be achieved through the efforts of the whole community; identifying the financial or other resources needed to fund the development of the NEIP plan; identifying the likely nature of involvement and resource commitments to be made by the partners; detailing the proposed process for developing the plan; developing the plan in consultation with the neighbourhood; developing processes to measure progress, milestones and review, including short and longer term indicators of progress toward goals; and ensuring that the process is open to all parts of the community; Environment Protection Act 1970 (Vic), s 19AH(1); VE P A, n 46, p 2-10; VEPA, A Guideline fo r Submitting a Voluntary Neighbourhood Environment Improvement Plan Proposal (Publication 847, VEPA, 2002) p 2-3.
A statistically significant negative regression coefficient is reported for the E-disclosure score in Table 6.26. This finding implies that Industrial firms with high E-disclosure scores yielded low CROIC values. Perusal of Table 6.26 furthermore reveals significant positive regression coefficients for both the S- and G-disclosure scores. Considering these findings, it can be inferred that Industrial firms that provided a more detailed disclosure of their social and corporate governance practices had higher CROIC values compared to firms with less detailed disclosure in this respect. According to Bauer, Guenster and Otten (2004), sound corporate governance practices lead to higher investor trust. As a result, investors view well-governed firms as less risky. Therefore, these investors might require a lower expected rate of return, resulting in a higher firm value. Furthermore, well-governed firms might have high operating performance and therefore high expected future FCFs, which in turn, may lead to higher firm value over the long term (Breuer & Nau, 2014: 20). The improvement in the FCFs of well-governed firms could be a reason for the observed positive association between G-disclosure and the CROIC measure.
seemly easy calculations from amount taken out of river to what this would equal in MLs in storage, took the best hydrographers many months/years of calculations, with a lot based on probabilities of stream flow and rainfall. The work was driven by John Paterson’s desire to have an economic approach to water and to be able to define the resource (Hancock 2010). Debates were held on what an environmental flow would look like at any point in a stream. Fisheries and Wildlife staff including Dr Peter Jackson, a well-known dedicated fish biologist, were involved (State of Victoria. Department of Water Resources Victoria 1989). A key question discussed was, if there was a holder of an environmental allocation as a bulk entitlement in storage, who would hold this entitlement and decide when it would be released. It was generally agreed that an environmental community group would not be able to undertake this role, especially as these groups hardly had the resources to come to meetings on the allocation of water and play the environmental role. These projects provided support to environmental flows work in the future.
Business. Business—particularly multinational business—is perhaps the most powerful of the nontraditional forms of governance. First, it is globally integrat- ed: Many multinational businesses function in one hundred or more countries and have integrated production and distribution systems throughout the world. Second, because these businesses are the engines of economic growth, they hold significant sway at the local, national, and regional levels. And, because they are multination- al, they can influence global institu- tions and the outcome of global treaties (although their capability to do so has not yet been fully realized). The bottom line is that unlike the more traditional players, business can operate on all levels and can therefore become the most influential actor in setting the rules and making them stick.
All the equipment purchased under the Tempus EnGo project will be used with the purpose to ensure high level of quality in teaching and researching issues of environmentalgovernance at all the three levels (bachelor, master and doctoral).All the equipment will be maintained and insured according to partners’ policies. The main beneficiaries of new equipment are students. Our special thanks belong to Donald Kuenen Foundation (DKF) that supported our partner institutions by donating scientific books in environmentalgovernance and related topics. The books were donated to four partner universities (2 from Belarus, 1 from Ukraine and 1 from Russia) and 2 research institutes (1 from Belarus and 1 from Ukraine); in total 91 books (67 titles) have been purchased. Books donated by the DKF will be used by the students to ensure the better quality of their research work, and to improve their academic English.
Legal institutions play an important role in facilitating the corporation’s engagement with its key stakeholders (Campbell, 2007; Aguilera & Jackson, 2003; Roe, 2003), as well as regulating to an extent the relationships among corporate actors within the same industry. Having their ideological routes in theories from the traditional economics discipline, many laws and regulations around the world are meant to promote competition between firms to achieve higher levels of efficiency, higher rates of innovation and ultimately, higher levels of social welfare, all else being equal. However, as Campbell (2007) notes, periods of very intense competition have been associated, with corporate irresponsible behavior, taking the form of “compromised product quality and safety, sweating labor and cheating customers (Kolko, 1963; McCraw, 1984; Schneiberg, 1999; Weinstein, 1968) in order to ensure minimal levels of profit, and thus, firm survival. We predict, therefore, that in countries with laws that promote high levels of competition, firms are more likely to score low on the social and environmental scores, whilst scoring high on the corporate governance score; higher levels of competition necessitate lean and efficient organizational structures, and overall better governance in order to be able to compete and survive in highly competitive environments.
bears repeating that “governance” suggests more than just involvement of public agencies in formulation and implementation of policy. In the words of Frederickson and Johnson, “governance is no longer about who takes the office and under whose jurisdiction a particular matter falls, rather the question is who is included in the policy negotiation and implementation”. It involves processes that engage in “multiple institutions that act in partnership to develop and deliver public policies and services”. Scholars who have examined state-society rela- tionship in East Asia have categorized the discourse into “bureaucratic-oriented politics”, “state-society syner- gy”, “soft authoritarianism” and “east Asian corporatism”. McEachern, a scholar who has worked on state-so- ciety relationships in East Asia argues that the corporatist state in this region has been successful in economic development but performed poorly in responding to social demands such as demands for housing, environment, and health. To overcome this, the state through the processes of “incorporation”, “assimilation” and “adaptation” deals with non-state actors in different ways. During the Maoist period, it was believed that “men can conquer nature” and subsequently, with the inauguration of market reforms under Deng Xiaoping, a renewed emphasis was laid on the “four modernizations”. However, empirical research and field reports on civil society and vo- luntary based organizations in post-Mao China highlight that ENGOs were among the first to have originated in the reforms era. Research has also shown that ENGOs have consolidated their linkages and connections within the activism community over a period of time and have articulated shared principles. However, there are two striking features of the findings in this domain of academic research. First, there are numerous instances of sharing of experiences between the ENGOS inter se and second, constant mutual learning as to how to interact with authorities with consequent recognition that these associations have received from the state. In the case of the latter, the growing “activism from below” and the pushing of state boundaries through multiple tools of ma- nipulation, is a significant development. One also observes an accumulation of practical knowledge in terms of decoding the official language and symbols. This has been referred to as “pushing the envelope” by Jenifer Turner, and “boundary spanning attention” by Kevin O’ Brien. This has also prompted some scholars like Tho- mas Heberer and Grunow Dieter to approach the question of environmentalgovernance in China by shifting their focus from what they call “effect evaluation” to “process evaluation”, a shifting of attention from “specific implementation perspectives” to governance principles that includes civil society actors .
Despite all this attention being valuable from a practical point of view, certain limitations are related to fund studies. Brammer et al.  and Kempf and Osthoff  pointed out that confusing effects, such as fund manager performance and management fees, complicate showing differences in investment fund performance. Evidence provided by Utz and Wimmer , Humphrey et al. , and Statman and Glushkov  showed that the ‘socially responsible’ label might be more akin to a marketing strategy, thus raising doubts among investors whether an SRI fund is really socially responsible. As a consequence, investors may struggle to know the extent to which an SRI fund is really considering social criteria in its selection process. To address these concerns, some studies followed a portfolio stock approach. They formed portfolios, including high- and low-ranked firms according to their ESG scores and investigated their financial differences. These studies found ambiguous results. Van de Velde et al. , Galema et al.  and Mollet and Ziegler  did not find significant financial differences between high- and low-ranked sustainable firms. Derwall et al. , Kempf and Osthoff , and Eccles et al.  showed that high-rated portfolios outperformed low-rated ones, but Brammer et al.  and Auer and Schuhmacher  found that high-ranked firms underperformed compared to their low-rated counterparts. In this paper, we follow this approach to elude drawbacks related to fund studies.
themselves with other companies (Adams et al., 2014). GRI is often regarded as “a good starting point” for this purpose. Moreover, the provision of a UNGC communication on progress is a new global trend that has become quite popular among business and non-profit organisations. Some of the European organisations are gradually disclosing environmental information or certain other key performance indicators that are of a non-financial nature in their reporting (Zadek et al., 2013). Generally, public policies are often viewed as part of the regular framework for social and employment practices. Therefore, a considerable commitment is made by local governments who act as drivers for stakeholder engagement (Albareda et al., 2008). One way to establish a CSR-supporting policy framework is to adopt relevant strategies and actions in this regard. Such frameworks may be relevant for those countries that may not have a long CSR tradition or whose institutions lack accountability and transparency credentials (Zadek et al., 2013). It may appear that EU countries are opting for a mix of voluntary and mandatory measures to improve their ESG disclosure. While all member states have implemented the EU Modernisation Directive, they have done so in different ways. While the Modernisation Directive ensured a minimum level of disclosure, it was in many cases accompanied by intelligent substantive legislation. National governments ought to give guidance or other instruments that support improvements in sustainability reporting. Lately, there was a trend towards the
Up until the 1960s , reporting of non-financial information in the corporate reports were considered as a corporate social responsibility measure and this information mainly focused on commitment to provide quality products and community involvement, human resources, employee relations. However, the environmental catastrophes such as Bhopal tragedy, BHP Billiton disaster add more fuel to the ongoing public debate on ESG issues such as environmental pollution, climate change, human rights and corporate ethics brought the importance of ESG disclosures to the forefront (Lokuwaduge and Heenatigala, 2017). According to KPMG (2008), two main factors have driven the need for sustainability reporting. Firstly, they find that issues related to sustainability affect the company's long-term economic performance and secondly the business community need to respond appropriately to issues related to sustainable development. As a result, sustainability reporting is gaining prominence as a communicating tool of those companies, which also enhances the quality of the relationship with internal and external stakeholders. Recent contributions from international organisations such as the United Nations Principles of Responsible Investment (UNPRI) and the Global Reporting Initiative (GRI) (2013) proposed various types of improvements to enhance ESG reporting practices around the globe.
For Cooperatives, in the borders of a good sustainability level, the highest indicators values are for governance, social and economic sustainability: Level of Adaptability to Market Environment, Level of Labor Productivity, Income per Farm- household Member, Contribution to Preservation of Rural Communities and Preservation of Traditions. Numerous of the environmental indicators of cooperative enterprises are also with superior levels – a high eco-sustainability for Nitrate Content in Ground Waters, and a good eco-sustainability for Nitrate and Pesticide Content in Surface Waters, Pesticide Content in Ground Waters, Number of Cultural Species, Extent of Application of Good Agricultural Practices, efficient Crop Rotation, and application of Norms of Nitrogen and Phosphorus Fertilization. All these positive aspects of the activity of Cooperative enterprises are to be maintained and expended.
The need to develop a culture of responsible, informed, and long-term credit rating analysis within the upper echelons of the Credit Rating Industry is abundantly clear. Recently, the U.S. Department of Justice (DoJ) concluded its investigations into wrongdoing by the two largest rating agencies, Standard & Poor’s and Moody’s, by agreeing to settle with the two for over $2 billion combined (S&P’s settlement being the larger of the two). The conduct of the two agencies in the creation and continuation of the Financial Crisis has therefore led to concerned onlookers developing initiatives to improve the internal mechanics of the agencies, so that their impact upon the economy, and therefore society, can be improved. One such endeavour is a recent push by the ‘Principles for Responsible Investment’ initiative, hereafter PRI, which since its inception in 2005 has sought to act in the interests of its signatories, the marketplace, and society moreover by incorporating long-term factors (Environmental, Social, and [corporate] governance – hereafter ‘ESG’) into the consciousness of those who pledge to engage with the overriding principles advanced by the initiative 1 . The aim of the
There are two main streams of integrated ESG research in terms of their key findings. One set of studies has concluded that the relationship is positive and suggests that the managerial skills of companies with good ESG performance are transferable to or synergised into corporate market activities. In other words, the stakeholder infers that a company with good ESG practices/reputation should also be able to perform well when competing in the market (Frooman, 1997; Schuler & Cording, 2006). Thus, the stakeholders (e.g., investors, consumers, and employees) will reward such ‘good management’ through investment, consumption, and higher productivity. Similarly, studies based on stakeholder theory suggest that mutual trust and cooperation with stakeholders reduce implicit and explicit costs for negotiating and contracting, and play a role in monitoring management, significantly reducing the likelihood of managers behaving opportunistically and pushing them to adopt a long-term orientation (Jones, 1995; Choi & Wang, 2009; Eccles, Ioannou & Serafeim, 2014). In contrast, two strands of empirical studies have explored a negative relationship between corporate ESG practices and financial performance. One strand suggests that managers who practise ESG activities neglect the opportunity cost of ESG actions and, consequently, sacrifice activities that would be more profitable for the company (Schuler & Cording, 2006). Over time, such ESG activities result in poor financial performance. The other strand is based on agency cost theory, which states that managers will engage in ESG practices for their own personal interests because monitoring such behaviour is not easy for shareholders (Schuler & Cording, 2006). This stream of research implies that managers who direct resources towards social projects fail to put those resources to their highest productive use and, over time, fail to maximise the firm's financial performance.
As suggested by Preston & O’Bannon (1997), ‘positive synergies’ and ‘available funding’ provide the best explanations for this observed positive relation. The positive synergies theory is consistent with the stakeholder theory that is applied in the broader CSR literature. For example, Baron (2008) suggests that a firm with better CSR performance can attract customers who value such expenditure and are thus inclined to pay more for what it produces and serves, employees who are happy to work harder thus increasing productivity, even investors who expect a lower financial return because they receive satisfaction from purchasing shares in a firm that makes social expenditures, and managers who may view CSR as a means to increase their personal satisfaction and social accumulation. Patterson (2013) also reports that voluntary ESG reporting and disc losure are expected to boost firms’ sales growth, attract talented employees, and reduce the cost of capital. ESG disclosure will thus enhance firm value in the long run. In addition, some stakeholders delegate their own social responsibility to firms, sug gesting that firms’ social responsibility is positively related to stakeholders’ loyalty, which enhances firms’ operating performance. Firms with greater ESG disclosure appeal to customers who are likely to delegate their own social responsibility to firms, resulting in better financial performance in the future. For example, Lev, Petrovits & Radhakrishnan (2010) show that a firm’s philanthropy is positively correlated with its future revenue growth in industries that are quite sensitive to consumer perception.
Since the aftermath of the Earth Summit in 1992, Agenda 21 (see UNDESA, 1992) was formulated as a blueprint for sustainable development. The ability to meet basic human needs in one way or another relates back to the creation of human settlement. Given that the construction industry has a significant role to play in terms of the sustainable development of human settlement, there was a call for an internationally agreed agenda on this issue which has led to the published report “Agenda 21 on Sustainable Construction” supported by the International Council for Research and Innovation in Building and Construction (CIB) (du Plessis, 2002). This report generated a plethora of debate among researchers on the meaning of sustainable construction and different ways to embed this concept within the construction industry. Perhaps the most commonly cited definition of sustainable construction is by Kibert (2016, p. 6): “creating and operating a healthy built environment based on resources efficiency and ecological principles” although this has been challenged by other scholars arguing that sustainability should not just be limited to ecological principles but also the broader aspects of sustainability including economic and social issues. Pearce (2006) outlines an economist’s approach to sustainability arguing that an asset-based approach can be applied to provide real insights into the function of the construction sector and its broader role in social and economic development.