Social Issues and Socially Responsible Investment Behavior: A Preliminary Empirical Investigation

An important dimension of the ongoing demand for greater corporate social responsibility is the emergence of the socially responsible investor (SRI). The SRI invests in companies whose actions support social objectives deemed desirable by the investor, e.g., reducing environmental pollution. There are two broad groups of SRIs: individuals and institutions such as public and private pension funds, trusts, and endowed institutions (e.g., universities or religious orders). While a couple of studies have examined the socially responsible investment criteria used by institutions such as pension funds (Gasper and Schweig 1985) and religious groups (Wokutch 1984), no studies have measured the identity, objectives, expectations, and social screens used by individuals in their investment decisions. As a result, the SRI is unknown except through anecdotal evidence (Schonbak 1984). Nevertheless, improving knowledge of the SRI is important for several reasons. First, the SRI is important to business given the growing volume of investor funds subjects to social screens and the need to anticipate challenges to corporate actions from a key stakeholder group. Second, the financial power of this group is substantial. For example, SRIs have invested hundreds of millions of dollars with mutual funds which incorporate a social screen in their investment decisions such as the Calvert Social Investment Fund, Pax World, and Dreyfus Third Century. To attract investment from SRIs, understanding what issues are salient to this group is critical. Finally, a database on the SRI establishes a baseline from which to track future developments and shifts in the importance of different social issues. This paper presents results of a study designed to answer some important questions about the individual SRI. First, who are SRIs? How do they differ from other investors? How homogeneous is the group of SRIs? Second, what issues are salient for this group as determinants of socially responsible corporate behavior? What do they expect from companies they invest in? BACKGROUND As with many contemporary social trends, the socially responsible investment movement emerged in the late 1960s as part of a broad challenge to business to conduct its affairs in a more socially responsible manner. In his "new social contract," Steiner suggests that "it is the duty of business today to anticipate potentially serious impacts of its action on individuals and prevent undesirable results" (1972, 22). Rather than wait for managers to recognize their social responsibilities, individuals and institutions seek to induce socially responsible behavior by becoming activist stakeholders in the task environment of corporations and by using financial investments to either punish or reward firm behavior (Freeman 1984). Increasingly, such behavior is becoming institutionalized. A good example is the move toward legislating forced divestiture by public pension funds of stocks of companies doing business in South Africa (Apcar 1984). However, these laws do not govern individual private investors. Their identities, attitudes, and behaviors must be studied to gauge what role social criteria play in their investment decisions. Some suggestions about the identity of the individual SRI can be drawn from research on socially responsible consumers such as those who reduce energy consumption (Ritchie, McDougall, and Claxton 1981), use nonpolluting household products (Brooker 1976; Henion, Gregory, and Clee 1980), or recycle (Anderson, Henion, and Cox 1975). Murphy summarizes the literature as indicating that socially concerned consumers are "younger, better educated and more affluent than the general populace" (1978, 316). Socially responsible consumption is presumably relevant and important to SRIs. However, a list of issues important to SRIs would not be identical to a list of socially responsible consumption behaviors. Many of the former fall beyond the scope of consumer behavior, such as providing equal employment opportunities. …