Publication Type
Working Paper
Version
publishedVersion
Publication Date
9-2020
Abstract
Corporate Social Responsibility (CSR) refers to the incorporation of Environmental, Social, and Governance (ESG) considerations into corporate management, financial decision making, and investors’ portfolio decisions. Socially responsible firms are expected to internalize the externalities (e.g. pollution) they create, and are willing to be accountable to shareholders as well as a broader group of stakeholders (employees, customers, suppliers, local communities,…). Over the past two decades, various rating agencies developed firm-level measures of ESG performance, which are widely used in the literature. A problem for past and a challenge for future research is that these ratings show inconsistencies, which depend on the rating agencies’ preferences, weights of the constituting factors, and rating methodology. CSR also deals with sustainable, responsible, and impact investing (SRI). The return implications of investing in the stocks of socially responsible firms, the search for an EGS factor, as well as the performance of SRI funds are the dominant topics. SR funds apply negative screening (exclusion of ‘sin’ industries), positive screening, as well as activism through proxy voting or direct engagement. In this context, one wonders whether responsible investors are willing to trade off financial returns with a ‘moral’ dividend (the return given up in exchange for an increase in utility driven by the knowledge that one invests ethically). A recent literature concentrates on green financing (the financing of environmentally friendly investment projects by means of green bonds) and on how to foster economic de-carbonization as climate change affects financial markets and investor behavior.
Keywords
Environmental, Social, and Governance, CSR, ESG, SRI, Socially Responsible Investments, Impact investing, Externalities, Stakeholders, Stakeholder governance, Climate change, Decarbonization, Global warming, Green bonds
Discipline
Business Law, Public Responsibility, and Ethics | Finance and Financial Management
Research Areas
Finance
First Page
1
Last Page
52
Identifier
10.2139/ssrn.3698631
Publisher
European Corporate Governance Institute Working Paper
City or Country
Brussells
Embargo Period
4-25-2022
Citation
LIANG, Hao and RENNEBOOG, Luc.
Corporate social responsibility and sustainable finance: A review of the literature. (2020). 1-52.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7001
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.3698631
Included in
Business Law, Public Responsibility, and Ethics Commons, Finance and Financial Management Commons