Socially Responsible Investment

Ph. D. Dissertation submitted to obtain the diploma of PHILOSOPHI? DOCTOR (PH. D. ) IN BUSINESS ADMINISTRATION FROM ESSEC BUSINESS SCHOOL and DOCTEUR EN SCIENCES DE GESTION tel-00497342, version 2 – 8 Jul 2011 DE L’UNIVERSITE PARIS OUEST NANTERRE LA DEFENSE Presented and defended publicly the 28th of June 2010 by Diane-Laure ARJALIES-DE LA LANDE DE VALLIERE Title of the dissertation: INSTITUTIONAL CHANGE IN THE MAKING THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT JURY Nicolas BERLAND Patricia CRIFO Philippe LORINO Nicolas MOTTIS Anne PEZET Robert W.
SCAPENS Supervisor Supervisor Referee Referee Professor, Universite Paris Dauphine (Paris, France) Professor, Universite Paris Ouest Nanterre La Defense (Nanterre, France) Professor, ESSEC Business School (Cergy, France) Professor, ESSEC Business School (Cergy, France) Professor, Universite Paris Dauphine (Paris, France) Professor, Manchester Business School (Manchester, United Kingdom) tel-00497342, version 2 – 8 Jul 2011 tel-00497342, version 2 – 8 Jul 2011 INSTITUTIONAL CHANGE IN THE MAKING THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT
Diane-Laure Arjalies-de la Lande de Valliere tel-00497342, version 2 – 8 Jul 2011 ABSTRACT ABSTRACT INSTITUTIONAL CHANGE IN THE MAKING THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT This dissertation explores the mechanisms of institutional change in practice. The institutional change under study relates to the progressive penetration of Socially Responsible Investment (SRI) criteria into conventional investment funds, a phenomenon which appeared during the 2000s, known as SRI Mainstreaming.

The dissertation aims to explain why SRI Mainstreaming has expanded into France and to identify its impacts on the practices of the French asset management sector. It mobilizes a three-year (2006-2009) longitudinal case study of a French asset management company, conducted as an SRI analyst. Research tel-00497342, version 2 – 8 Jul 2011 methods rely on the pragmatist concept of inquiry and combine participative observation, semi-structured interviews and documentary evidence. The dissertation comprises three articles that should be considered together.
The first article offers a sociological chronology of the French SRI movement by tracing the different phases of its development. In demonstrating that the French SRI Movement presents great similarities with a social movement, the article argues that SRI actors collectively and deliberately got organized for SRI Mainstreaming institutional change to occur. The second article studies how an asset management company transformed its equity investment practices in response to SRI Mainstreaming.
It argues that the practices, institutional logics and technical objects of company members were co-transformed, through a collective inquiry. In particular, the article demonstrates that SRI Mainstreaming triggered change in practices through the transformation of a technical object (i. e. an object which embodies the knowledge available at a given moment in time) – the representation of an investment process – into an epistemic object (i. e. an object under research). The third article explains why the transformation of practices in response to SRI Mainstreaming differed between equity and fixed-income investment.
For this purpose, it compares two working groups inside the same asset management company that attempted to (re)design equity and fixed-income investment processes, respectively. The article argues that variation in practices faced with institutional change is explained as much by institutional logics, as by technical objects and contingent elements. Namely, the lack of relevant SRI criteria and the contradictions between SRI and 1 INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT ixed-income logics explain why fixed-income investment faced more difficulties than equity investment in transforming its practices. The contributions of the dissertation are threefold: theoretical, methodological and practical. Firstly, the dissertation has built a bridge between institutional theories, on the one hand, and practice theories, on the other, by connecting institutional change to the transformation of daily work practices. In addition, it has expanded previous research on institutional change and management accounting by exploring the role of objects in the transformation of practices.
Secondly, the dissertation has enriched representational methodologies traditionally employed in organizational studies by mobilizing a nonrepresentational epistemology, based on the pragmatist concept of inquiry. In doing so, it has demonstrated that when a researcher investigates a situation, instead of observing it, he/she is more likely to understand the everyday practices of actors. Lastly, the dissertation has offered tel-00497342, version 2 – 8 Jul 2011 practitioners a better understanding of the impacts of SRI Mainstreaming on the practices of asset management.
In particular, it has provided them with theoretical keys to better understand the interest of „SRI labels? and why SRI faced more difficulties in fixed-income investment, compared to equity investment. Key-words Asset Management – Epistemic Object – Equity Investment – Fixed-Income Investment – France – Institutional Change – Mainstreaming – Practices – Social Movement – Socially Responsible Investment (SRI) Author? s adress: Diane-Laure Arjalies, [email protected] fr, Accounting and Control Department, HEC School of Management, 1, rue de la Liberation F-78351 Jouy-en-Josas, France. 2 RESUME RESUME
LES MECANISMES DU CHANGEMENT INSTITUTIONNEL LE CAS DE L’INVESTISSEMENT SOCIALEMENT RESPONSABLE Cette these cherche a mieux comprendre quels sont – au niveau des pratiques des acteurs – les mecanismes sous-jacents a un changement institutionnel en cours dans le secteur francais de la gestion d? actifs, connu sous le nom d? « ISR Mainstreaming ». Ce phenomene, apparu dans les annees 2000, fait reference a la penetration progressive et massive de criteres d? Investissement Socialement Responsable (ISR) dans les fonds d? investissement conventionnels (egalement appeles fonds « mainstream » ou « courant principal »).
En particulier, la these cherche a identifier les raisons qui peuvent expliquer l? emergence d? un tel tel-00497342, version 2 – 8 Jul 2011 changement au niveau du secteur et a analyser l? impact de ce dernier sur les pratiques des gestionnaires d? actifs. Pour ce faire, la these s? appuie sur une etude de cas longitudinale de trois ans (2006-2009) d? une societe de gestion d? actifs francaise, conduite par l? auteur en tant qu? analyste ISR. D? inspiration pragmatiste, la these mobilise une methode d? enquete cooperative combinant observation participante, entretiens semi-diriges et analyse de sources documentaires.
Ecrite sous forme d? articles, la these s? interesse 1) aux origines du mouvement de l? ISR, 2) a la transformation des pratiques des societes de gestion d? actifs en reponse au phenomene d? ISR Mainstreaming et 3) aux differences constatees entre gestion actions et gestion taux lors de la transformation de ces pratiques. Offrant une chronologie sociologique du mouvement francais de l? ISR, le premier article demontre notamment que le phenomene d? ISR Mainstreaming resulte d? une action collective et reflechie – presentant de grandes similarites avec un mouvement social – menee par les promoteurs de l? ISR au niveau du secteur.
Le deuxieme article etudie de facon detaillee les mecanismes de transformation des pratiques de gestion actions d? une societe de gestion d? actifs en proie au phenomene d? ISR Mainstreaming. En particulier, l? article etablit que les pratiques, les logiques institutionnelles et les objets techniques (i. e. les objets stables incarnant le savoir existant a un moment donne) des differents acteurs de la societe se sont transformes mutuellement, au cours d? une enquete collective. Cette enquete a notamment consiste a transformer un objet epistemique (i. e. un objet de recherche) – la representation des processus d? nvestissement – en un objet technique. Poursuivant cette analyse, le troisieme et dernier article compare, au sein de la 3 INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT meme societe de gestion d? actifs, les processus de transformation des pratiques de la gestion actions avec ceux de la gestion taux. L? article prouve que les divergences constatees entre ces processus de transformation, pourtant en proie au meme changement institutionnel, s? expliquent par les differences entre les deux types de gestion en termes d? objets techniques, de logiques institutionnelles et de dimensions contingentes.
Plus precisement, les difficultes rencontrees par la gestion taux resultent, d? une part, des contradictions existantes entre les logiques institutionnelles ISR et les logiques institutionnelles de la gestion taux et, d? autre part, de la non pertinence pratique des criteres ISR actuellement utilises dans ce type de gestion. Les contributions de la these sont de trois ordres : theorique, methodologique et pratique. Theoriquement, cette these est l? une des premieres a integrer dans un meme cadre conceptuel a la fois des theories institutionnelles et des theories centrees sur les pratiques.
En explorant le tel-00497342, version 2 – 8 Jul 2011 role des objets dans la transformation des pratiques, elle compte egalement parmi le peu d? etudes en controle de gestion qui se soient interessees a la fonction des systemes de gestion dans le changement institutionnel. Methodologiquement, la these enrichit les epistemologies representationnelles traditionnellement utilisees dans les etudes des organisations en mobilisant une epistemologie non-representationnelle, basee sur le concept pragmatiste d? enquete. Ce faisant, la these demontre qu? un chercheur utilisant une methode cooperative d? nquete visant a collaborer avec les acteurs de terrain dans une perspective de transformation des pratiques – et non d? une simple observation de ces dernieres – est plus a meme de comprendre les pratiques quotidiennes des acteurs, qu? un chercheur mobilisant une methodologie representationnelle. Enfin, la these offre aux praticiens des clefs theoriques leur permettant de mieux comprendre les impacts du phenomene d? ISR Mainstreaming sur les pratiques de la gestion d? actifs, au premier rang desquels le role des « labels ISR » et les difficultes rencontrees par la gestion taux pour transformer ses pratiques.
Mots-clefs Changement Institutionnel – France – Gestion Actions – Gestion d? Actifs – Gestion Taux – Investissement Socialement Responsable (ISR) – Mainstreaming – Mouvement Social – Objet Epistemique – Pratiques Adresse de correspondance : Diane-Laure Arjalies, [email protected] fr, Departement Comptabilite-Controle, HEC School of Management, 1, rue de la Liberation F-78351 Jouyen-Josas, France. 4 TABLE OF CONTENTS TABLE OF CONTENTS LIST OF FIGURES ………………………………………………………………….. ……………………………. 1 REMERCIEMENTS ……………………………………………………………………………………………….. 15 ACKNOWLEDGMENTS ……………………………………………………………………………………….. 19 INTRODUCTION – Explaining Institutional Change in the French Asset Management Sector: The Phenomenon of ‘SRI Mainstreaming’ ……………………………………………………. 23 1. From SRI to Mainstream: The SRI Mainstreaming Phenomenon ……………………….. 26 1. 1. 1. 2. el-00497342, version 2 – 8 Jul 2011 1. 3. 2. 3. SRI at a Glance: The French Particularities ……………………………………………….. 26 SRI: How Does It Work? ………………………………………………………………………… 29 SRI Mainstreaming: The Appearance of a New Institution? ………………………… 32 Research Questions under Study in the Dissertation …………………………………………. 35 Explaining Institutional Change in Practice ……………………………………………………… 35 3. 1. 3. 2.
Institutional Theories and their Limits ………………………………………………………. 35 Theoretical Background of the Dissertation ………………………………………………. 40 4. Research Methods ………………………………………………………………………………………… 42 4. 1. 4. 2. 4. 3. Epistemological Position…………………………………………………………………………. 42 Research Process ……………………………………………………………………………………. 6 Research Outcomes ………………………………………………………………….. ……………. 51 5. Overview of the Articles ……………………………………………………………………………….. 53 ARTICLE 1 – A Social Movement Perspective on Finance: How Socially Responsible Investment Mattered ……………………………………………………………………………………………….. 67 RESUME ……………………………………………………………………………………………………………. 9 SUMMARY ………………………………………………………………………………………………………… 71 1. 2. Introduction …………………………………………………………………………………………………. 75 Theoretical Issues under Scrutiny …………………………………………………………………… 78 2. 1. Changing Institutions: The Role of Social Movements ……………………………….. 78 5 INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT . 2. 3. Explaining Institutional Change in an Organizational Field …………………………. 80 Research Setting …………………………………………………………………………………………… 82 3. 1. 3. 2. What Is Socially Responsible Investment? ………………………………………………… 82 Features of the French SRI Social Movement ……………………………………………. 82 4. Research Methods ………………………………………………………………………………………… 4 4. 1. 4. 2. Data Collection and Sources ……………………………………………………………………. 84 Data Analysis ………………………………………………………………………………………… 86 5. Case Study: Emergence, Development and Future of the French SRI Movement …. 91 5. 1. 5. 2. 1997-1999: The Pioneering Era ……………………………………………………………….. 91 2000-2003: The Building Era ………………………………………………………………….. 2 2004-2005: The Legitimating Era …………………………………………………………….. 95 2006-2009: The Mainstreaming Era …………………………………………………………. 97 The Future: A Coexistence of Two Types of SRI? ……………………………………… 99 tel-00497342, version 2 – 8 Jul 2011 5. 3. 5. 4. 5. 5. 6. Discussion and Conclusions…………………………………………………………………………. 102 6. 1. 6. 2. 6. 3. 6. 4. Summary of Findings …………………………………………………………………………… 102 The Role of Social Movements in Transforming Economic Institutions ……… 103 The Economic Success of SRI ……………………………………………………………….. 104 The Future of SRI ………………………………………………………………………………… 105 ARTICLE 2 – Transforming Practices In Response To Institutional Change: Exploring the Role of Objects ………………………………………………………………………………………………… 15 RESUME ………………………………………………………………………………………………………….. 117 SUMMARY ………………………………………………………………………………………………………. 119 1. 2. Introduction ……………………………………………………………………………………………….. 123 Theoretical Background ………………………………………………………………………………. 125 2. 1. 2. 2. 2. 3. Transforming Practices in Response to Institutional Change ……………………… 25 The Need for a Collective Inquiry ………………………………………………………….. 127 The Role of Objects ……………………………………………………………………………… 129 6 TABLE OF CONTENTS 2. 4. 3. Proposal for a Theoretical Model……………………………………………………………. 131 Case Study Features ……………………………………………………………………………………. 132 3. 1. 3. 2. 3. 3. What is SRI Mainstreaming? …………………………………………………………………. 32 The Company under Study ……………………………………………………………………. 134 The (re)Design of Collective Activity …………………………………………………….. 135 4. Research Methods ………………………………………………………………………………………. 137 4. 1. 4. 2. Research Epistemology …………………………………………………………………………. 137 Research Process ………………………………………………………………………………….. 139 5.
Case Study Findings ……………………………………………………………………………………. 140 5. 1. Stages 1&2: Indeterminate Situation and Institution of a Problem (AugustSeptember 2007) ………………………………………………………………………………….. 140 5. 2. Stages 3&4: Determination of a Problem-Solution & Reasoning (September 2007-January 2008)………………………………………………………………………………. 142 5. 3. 5. 4. Stage 5: The Operational Character of Facts-Meanings (January-July 2008) .. 50 Epilogue (January 2010) ……………………………………………………………………….. 153 tel-00497342, version 2 – 8 Jul 2011 6. Discussion and Conclusions…………………………………………………………………………. 154 6. 1. 6. 2. 6. 3. Theoretical Contributions ……………………………………………………………………… 154 Methodological Contributions ……………………………………………………………….. 155 Limitations and Perspectives …………………………………………………………………. 56 ARTICLE 3 – Explaining Practice Variation when Faced with Institutional Change: The Example of Socially Responsible Investment ……………………………………………………. 163 RESUME ………………………………………………………………………………………………………….. 165 SUMMARY ………………………………………………………………………………………………………. 167 1. 2. Introduction ……………………………………………………………………………………………….. 71 Theoretical Framework ……………………………………………………………………………….. 174 2. 1. 2. 2. Explaining Institutional Change……………………………………………………………… 174 Explaining Practice Variation when Faced with Institutional Change …………. 175 7 INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT 2. 3. Understanding the Intra-Organizational Mechanisms of Institutional Change: Proposal for a Theoretical Model……………………………………………………………. 77 3. Delineating the Structure and Institutional Constituents ………………………………….. 181 3. 1. 3. 2. 3. 3. The French Asset Management Sector ……………………………………………………. 181 The Asset Management Company under Study ………………………………………… 182 Institutional Logics at Stake within the Company …………………………………….. 184 4. Research Methods ………………………………………………………………………………………. 186 4. 1. 4. 2.
Research Position …………………………………………………………………………………. 186 Research Process ………………………………………………………………………………….. 187 5. tel-00497342, version 2 – 8 Jul 2011 The Case Study ………………………………………………………………………………………….. 190 5. 1. 5. 2. 5. 3. What is an SRI Fund? …………………………………………………………………………… 190 Equity Investment Working Group …………………………………………………………. 92 Fixed-Income Investment Working Group ………………………………………………. 196 6. Transforming the Investment Processes into Epistemic Objects ……………………….. 199 6. 1. 6. 2. The Need for an Epistemic Object ………………………………………………………….. 199 Comparing the Inquiries………………………………………………………………………… 202 7. Explaining Differences between the Inquiries ………………………………………………… 207 7. 1. 7. 2. 7. 3. 7. 4. 7. 5. What If Everything Was about Contingency? …………………………………………. 207 Institutional Logics Prevailing in Each Working Group ……………………………. 209 Technical Objects Available for the Inquiry …………………………………………….. 210 Integrating Institutional Change into Technical Objects ……………………………. 211 Institutional Factors………………………………………………………………………………. 213 8. Discussion and Conclusions…………………………………………………………………………. 214 8. 1. 8. 2. 8. 3.
Explaining Practice Variation in Socially Responsible Investment ……………… 214 Understanding Practice Variation when Faced with Institutional Change ……. 215 Implications for Further Research…………………………………………………………… 216 8 TABLE OF CONTENTS CONCLUSION – The Future of SRI Mainstreaming: From Institutional Change to Change of Institutions ……………………………………………………………………………………………. 223 1. Contributions of the Dissertation ………………………………………………………………….. 27 1. 1. 1. 2. 1. 3. 2. Theoretical Contributions ……………………………………………………………………… 227 Methodological Contributions ……………………………………………………………….. 229 Practical Contributions………………………………………………………………………….. 230 Limitations of the Dissertation ……………………………………………………………………… 232 2. 1. 2. 2. 2. 3. Theoretical Limitations …………………………………………………………………………. 32 Methodological Limitations …………………………………………………………………… 234 Practical Limitations …………………………………………………………………………….. 235 tel-00497342, version 2 – 8 Jul 2011 3. The Future of SRI Mainstreaming ………………………………………………………………… 236 3. 1. 3. 2. 3. 3. 3. 4. The Pursuit of the Phenomenon ……………………………………………………………… 236 The Appearance of New SRI Funds ……………………………………………………….. 37 Future Challenges ………………………………………………………………………………… 240 Managerial Recommendations ……………………………………………………………….. 242 4. Avenues for Further Research ………………………………………………………………………. 243 REFERENCES ……………………………………………………………………………………………………… 249 APPENDICES ………………………………………………………………………………………………………. 65 APPENDIX A – A Managerial Perspective on the Porter Hypothesis: The Case of CO 2 Emissions ………………………………………………………………………………………………………………. 267 APPENDIX B – Corporate Social Responsibility: A New Business Model for Multinational Companies? …………………………………………………………………………………….. 295 RESUME SUBSTANTIEL EN FRANCAIS ……………………………………………………………. 333 1. De l? ISR vers le « Mainstream » : le phenomene d?
ISR Mainstreaming…………….. 336 1. 1. 1. 2. Les particularites de l? ISR francais …………………………………………………………. 336 L? ISR Mainstreaming : l? apparition d? une nouvelle institution ? ………………… 337 9 INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT 1. 3. 2. Questions de recherche …………………………………………………………………………. 338 Cadre theorique ………………………………………………………………………………………….. 39 2. 1. 2. 2. Les limites des theories institutionnelles …………………………………………………. 339 L? apport des theories centrees sur les pratiques aux theories institutionnelles . 341 3. Methodologie …………………………………………………………………………………………….. 343 3. 1. 3. 2. Positionnement epistemologique ……………………………………………………………. 343 Processus de recherche………………………………………………………………………….. 344 4. 5.
Resultats ……………………………………………………………………………………………………. 347 Contributions de la these ……………………………………………………………………………… 350 5. 1. Contributions theoriques ………………………………………………………………….. …… 350 Contributions methodologiques ……………………………………………………………… 351 Contributions pratiques …………………………………………………………………………. 351 tel-00497342, version 2 – 8 Jul 2011 . 2. 5. 3. 6. Limites de la these………………………………………………………………………………………. 351 6. 1. 6. 2. 6. 3. Limites theoriques ………………………………………………………………………………… 352 Limites methodologiques ………………………………………………………………………. 352 Limites pratiques ………………………………………………………………………………….. 353 7. Pistes pour l? avenir ……………………………………………………………………………………… 53 7. 1. 7. 2. 7. 3. Le phenomene d? ISR Mainstreaming ……………………………………………………… 353 Recommandations manageriales …………………………………………………………….. 354 Futurs travaux de recherche …………………………………………………………………… 354 10 LIST OF FIGURES LIST OF FIGURES Figure 0. 1: Organization of the French Asset Management Sector Regarding SRI ……………. 30 Figure 0. 2: Synopsis of the Dissertation ………………………………………………………………………. 53 Figure 1. : Key Elements of Framing – SRI French Sector 1997-2009 ……………………………. 89 Figure 1. 2: Number of Asset Management Companies Providing SRI Funds …………………… 90 Figure 1. 3: Evolution of SRI and Conventional Assets (100 Points Base in 2000) …………….. 90 Figure 1. 4: Number of Articles Mentioning SRI in French Newspapers …………………………… 91 Figure 1. 5: Number of SRI Analysts in Asset Management Companies …………………………… 91 Figure 2. 1: The Role of Objects in the Inquiry ……………………………………………………………. 130 Figure 2. : The Mechanisms of Collective Inquiry ……………………………………………………… 131 Figure 2. 3: SRI Invest? s Organizational Chart …………………………………………………………….. 134 Figure 2. 4: Investment Process (October 2007) …………………………………………………………… 144 tel-00497342, version 2 – 8 Jul 2011 Figure 2. 5: Investment Process (November 2007) ……………………………………………………….. 146 Figure 2. 6: Investment Process (January 2008) …………………………………………………………… 49 Figure 2. 7: Decision Matrix (January 2008) ……………………………………………………………….. 150 Figure 3. 1: Epistemic Model of Institutional Change …………………………………………………… 178 Figure 3. 2: SRI Invest? s Organizational Chart …………………………………………………………….. 183 Figure 3. 3: The Structure and Logics of Institutional Change at the Initial Stage …………….. 184 Figure 3. 4: Decision Matrix ……………………………………………………………………………………… 94 Figure 3. 5: Equity Investment Process ……………………………………………………………………….. 195 Figure 3. 6: Fixed-Income Funds? SRI Constraint ………………………………………………………… 198 Figure 4. 1: Synopsis of the Thesis – What Remains to Be Studied ………………………………… 233 Figure 5. 1: A Dynamic Relationship (Source: Simons (1995)) ……………………………………… 273 Figure 5. 2: DuPont, Lafarge and Unilever at a Glance …………………………………………………. 78 Figure 5. 3: The Two Stage Model …………………………………………………………………………….. 285 Figure 5. 4: Application to DuPont …………………………………………………………………………….. 286 Figure 6. 1: A Dynamic Relationship (Source: Simons (1995)) ……………………………………… 305 Figure 7. 2: Synopsis de la these ………………………………………………………………………………… 348 11 INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT
LIST OF TABLES Table 0. 1: Overview of the Articles …………………………………………………………………………….. 54 Table 2. 1: Actors Characteristics ………………………………………………………………………………. 137 Table 3. 1: Institutional Logics at Each Stage ………………………………………………………………. 203 Tableau 7. 1: Vue d? ensemble des articles …………………………………………………………………… 349 tel-00497342, version 2 – 8 Jul 2011 12 ACRONYMS ACRONYMS
AFG – Association Francaise de Gestion financiere (French Association of Asset Management) AGIRC-ARCCO – Association Generale des Institutions de Retraite Complementaire des Cadres-Association pour le Regime de Retraite Complementaire des Salaries (General Association of Institutions Specializing in Private Pension Schemes for Executives and Employees) AMF – Autorite des Marches Financiers (French Securities Regulator) CIFRE – Convention Industrielle de Formation par la Recherche en Entreprise (Industrial Contracts for Training Through Research) CSR – Corporate Social Responsibility CIES – Comite Intersyndical de l?
Epargne Salariale (TradeUnions Committee for Employee Savings Funds) ERAFP – Etablissement de la Retraite Additionnelle de la Fonction Publique (French Public Service Additional Pension Scheme) FIR – Forum pour l?
Investissement Responsable (French Social Investment Forum) FRR – Fonds de Reserve des Retraites (Pension Reserve Fund) IFA – Institut Francais des Administrateurs (Representing the views of the French company boards) NGO – Non-Governmental Organization OPCVM – Organismes de Placement Collectifs en Valeurs Mobilieres (Organizations for Collective Investment in Transferable Securities) ORSE – Observatoire sur la Responsabilite Societale des Entreprises (Study Center for Corporate Social Responsibility) PRI – Principles for Responsible Investment SFAF – Societe Francaise des Analystes Financiers (French Society of Financial Analysts) SRI – Socially Responsible Investment UNEP-FI – United Nations Environment Program Finance Initiative UQAM – Universite du Quebec a Montreal (University of Quebec at Montreal) tel-00497342, version 2 – 8 Jul 2011 13 tel-00497342, version 2 – 8 Jul 2011 REMERCIEMENTS REMERCIEMENTS Le doctorat est un temps d? initiation difficile au cours duquel le directeur de these cherche a inculquer a son doctorant l? autonomie necessaire qui lui permettra de passer du statut d? etudiant a celui de collegue. Aujourd? hui, c? st a ce travail de transmission souvent invisible et pourtant essentiel auquel je veux d? abord rendre hommage. Je tiens a exprimer ma profonde gratitude envers mes directeurs de these, Philippe Lorino et Nicolas Mottis, qui n? ont jamais cesse au cours de ces quatre dernieres annees de me guider, m? encourager et me rassurer. En partageant avec moi leurs connaissances et leurs passions, ils ont reussi ce que l? enseignement a de plus difficile : me donner les moyens d? etre libre. Je remercie l? ESSEC, creuset de cultures et d? experiences, qui m? a aidee a construire des fondations solides et justes tant en termes de savoir, que de savoir-faire et de savoir etre.
Ces sept annees au sein de l? institution ont ete l? occasion pour moi de beaucoup de bonheurs, d? echanges et de decouvertes, qui seront autant de briques et de fondements sur lesquels batir mon avenir. tel-00497342, version 2 – 8 Jul 2011 Cette aventure sur le chemin de la connaissance n? aurait pas ete possible sans le soutien et l? aide de plusieurs professeurs, qui ont su me transmettre leur attachement, experience et pratique de la recherche. Je suis particulierement reconnaissante envers Bob Scapens et Trevor Hopper, qui m? ont accueillie et suivie au sein de la Manchester Business School. L? attention, les conseils et les encouragements qu? ils m? nt dispenses ont non seulement joue un role determinant dans la redaction de ma these mais egalement dans le choix de ma discipline de recherche : le controle. Tous mes remerciements vont egalement a Jean-Pierre Ponssard, dont l? appui et l? ecoute ont ete d? un grand reconfort tant sur le plan professionnel que personnel, et a Laurent Bibard, qui n? a jamais cesse d? etre a mes cotes au cours de ces sept dernieres annees. J? adresse egalement mes sinceres remerciements a Nicolas Berland et a Anne Pezet, qui ont accepte de partager avec moi leur expertise et experience en me faisant l? honneur d? etre sur mon jury. Enfin, je n? oublie pas Philippe Zarlowski, qui m? a toujours soutenue, rientee et encouragee avec une grande gentillesse et beaucoup de delicatesse. Je remercie ces femmes chercheuses exceptionnelles qui par leur courage et professionnalisme, m? ont ouvert la voie d? une carriere academique prometteuse. Je pense ici a Patricia Crifo, qui a ete d? un soutien inestimable tout au long de la these et qui a su partager avec moi ses idees, son enthousiasme et son amitie, a Marie-Laure Djelic, qui a toujours ete tres disponible a mon egard tant pour me prodiguer de judicieux conseils que pour me transmettre sa passion et sa connaissance de la recherche et a Marie-Leandre Gomez, qui m? a toujours encouragee et aidee et dont l? avis, l? optimisme et l? humour ont ete d? rremplacables allies dans des moments clefs de mon parcours. Faire une these, c? est aussi avoir la chance de pouvoir appartenir a un collectif, ou l? on partage ses reussites et ses echecs, ou la solidarite depasse les frontieres et les disciplines et ou, finalement, on apprend et on grandit ensemble : la communaute des doctorants. Je remercie en particulier, Francois Perrot, avec qui j? ai partage mes reves, mes joies et mes peines et qui a ete un compagnon de route fidele et precieux. Tous mes remerciements vont egalement a Hae-Jung Hong, Farah Kodeih, Afshin Mehrpouya et Mahmood Shafeie Zargar, qui en partageant avec moi leurs regards et experiences m? nt permis a la fois de decouvrir des mondes que je ne connaissais pas et de redecouvrir un monde que je croyais connaitre. Je remercie egalement mes amis doctorants et post-doctorants suedois, Katarina Buhr, Ravi Dar, Johan Gregeby et Ruben Hoffman, avec qui j? ai pu partager ma passion pour la recherche et 15 INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT dont l? accueil et l? amitie m? ont beaucoup touchee. Je remercie enfin mes collegues de l? Ecole Polytechnique, avec qui j? ai passe une annee exceptionnelle et qui ont toujours ete d? une grande ouverture d? esprit a mon egard. Je pense en particulier a Vanina Forget, Samer Hobeika, Delphine Prady et Samuel Touboul, avec qui j? i eu le privilege et la grande joie de partager le quotidien de ces derniers mois. Au cours de ces annees, j? ai eu la chance d? etre accueillie dans quatre institutions et d? y rencontrer des chercheurs passionnes et passionnants, qui ont tous contribue, d? une maniere ou d? une autre, a ma formation intellectuelle et citoyenne. Je suis particulierement reconnaissante envers les chercheurs de l? Accounting and Finance Group de l? Universite de Manchester (Royaume-Uni), aupres desquels j? ai beaucoup appris et qui ont su me transmettre leur interet et connaissance de la recherche. Je remercie en particulier, Sven Modell, Jodie Moll, Ted O? Leary, Jeffrey Unerman et ChunLei Yang, qui ont ete d? n grand soutien et d? une aide precieuse lors de la redaction de ma these. Je remercie egalement tous les chercheurs du Departement de Business Studies de l? Universite d? Uppsala (Suede) avec qui j? ai passe des moments inoubliables et qui ont fait de mon sejour scandinave une idylle tant intellectuelle que personnelle. Je remercie notamment, Maria Blomgren, Henrik Dellestrand, Mikael Eriksson, Magnus Frostenson, Jaan Grunberg, Pao Kao, Agata Kostrzewa, Emilia Kvarnstrom, Josef Pallas, Firouze Pourmand, Dariusz Osowski et Linda Wedlin. Mes remerciements vont egalement aux chercheurs de la Chaire de Responsabilite Sociale et Developpement Durable de l?
Universite du Quebec a Montreal (Canada), qui ont su me transmettre leur interet et leur passion pour les questions sociales, societales et environnementales ayant trait a l? entreprise. Je remercie tout particulierement Sarah GagnonTurcotte, Caroline Mailhot, Jean Pasquero et Rosalie Vendette qui m? ont fait decouvrir de nouveaux horizons de recherche francophones et engages. Enfin, tous mes remerciements vont a mes collegues du Departement d? Economie de l? Ecole Polytechnique, Edouard Challe, Clemence Christin, Jean-Francois Laslier, Sabine Lemoyne de Forges, Guy Meunier, JeanPhilippe Nicolai, Francois Poinas, Sylvaine Poret, Claudia Saavedra et Idrissa Sibailly, qui m? ont permis de mieux saisir et comprendre tout l? interet des sciences economiques et de la recherche pluridisciplinaire.
Je garderai de ces sejours la conviction profonde et intime que les plus grandes conquetes scientifiques et humaines ne pourront avoir lieu que dans un monde academique sans frontieres. J? adresse egalement mes plus sinceres remerciements a l? ensemble des praticiens qui m? ont ouvert leurs portes et accorde du temps. Je suis particulierement reconnaissante envers mes collegues de MACIF Gestion qui n? ont jamais cesse de m? encourager et qui se sont pretes avec entrain et sincerite a l? exercice difficile de reflexion collective exige par la recherche. Je tiens ici a remercier l? ensemble des acteurs anonymes de cette these sans qui rien n? aurait ete possible : Delphine Caron, Pierre Chaize,
Dominique Eugene, Laurent Fabiani-Lagarde, JeanFrancois Gallais, Jean-Marc Grivel, Severine Haddad, Sophie Jordery, Hortense Keichinger, Francis Linger, Frederic Meschini, Jean-Marie Pean, Gilles Pecaut, Caroline Raimundo, Emmanuelle Serouchni, Emmanuel Sousa, Remi Tinel, Eric Van la Beck, Daniel Ventrin, Ingrid Vidal et Thierry Wiedemann-Goiran. Une these CIFRE est avant tout un travail d? equipe. Je remercie aussi tous mes amis qui ont toujours ete bienveillants a mon endroit, disponibles et attentifs a ce que je puisse reussir tout ce que j? avais entrepris. Je pense ici tout particulierement a mes deux amis d? enfance, Tatiana Fovel et Morgane Trehen, qui me font l? onneur de partager avec moi leur amitie depuis vingt ans et qui ont toujours veille a egayer et tromper mes moments de doute par leurs rires et optimisme. Je suis egalement extremement 16 tel-00497342, version 2 – 8 Jul 2011 REMERCIEMENTS reconnaissante envers Michelle Fawcett, qui patiemment, mois apres mois, a relu, corrige et commente l? anglais de mes articles avec beaucoup de gentillesse et de confiance. Je puis desormais temoigner que le flegme britannique n? a rien de legendaire. Enfin, je remercie ma famille qui s? est toujours enthousiasmee, rejouie et enorgueillie de mes choix et aventures, quoi qu? ils fussent. J? ai ete particulierement touchee par les efforts deployes par mes freres, s? rs, parents, beaux-parents et grands-parents pour apprehender et tenter de mieux comprendre un monde et une langue qui leur etaient etrangers. Mes derniers remerciements mais de loin les plus grands vont a mon mari, Sebastien, qui depuis sept ans n? a jamais cesse de me soutenir, m? encourager et m? aider pour que je realise ma passion. J? ai puise dans ton amour tant de force et de ressources que plus aucun reve, ni aucune utopie ne me parait desormais inatteignable. Au terme de ce parcours, c? est au systeme educatif francais et europeen dans son ensemble auquel je veux enfin rendre hommage. Si la these dure quatre ans, c? est bien deux decennies d? education qu? elle recompense. tel-00497342, version 2 – 8 Jul 2011
Ce travail de recherche a beneficie des financements suivants : Cofinancement du ministere charge de la recherche et du Fonds Social Europeen (FSE) concernant l? embauche des femmes CIFRE dans le cadre de la mesure 89 axe 5 de l? objectif 3 : « Ameliorer l? acces et la participation des femmes au marche du travail. ». Prise en charge des frais d? inscription du Ph. D. par l? ESSEC Ph. D. Bourse Marie Curie pour les jeunes chercheurs au sein de la Manchester School of Accounting and Finance, financee par la Commission Europeenne. Allocation de recherche au sein du Departement d? Economie de l? Ecole Polytechnique, financee par les Chaires Finance Durable et Investissement Responsable et Business Economics. 17 tel-00497342, version 2 – 8 Jul 2011 ACKNOWLEDGMENTS ACKNOWLEDGMENTS
Completing a doctorate is a complex period of initiation during which the thesis advisor seeks to instill in the PhD candidate the necessary autonomy to progress from „student? to „colleague?. First and foremost, I would like to pay homage to this oft-indiscernible, though essential, function by expressing my sincere gratitude to my own thesis advisors, Philippe Lorino and Nicolas Mottis, who over the past four years never ceased to guide, encourage and reassure me. By sharing their knowledge and passion, they succeeded in accomplishing the most difficult task required in teaching – giving me the means to be free. I would like to thank ESSEC – a veritable melting pot – that has helped me build solid and honorable foundations for knowledge, expertise and self-awareness.
My seven years at ESSEC were full of joy and filled with numerous occasions for exchange and discovery, which provided the bricks with which to build my future. This adventure on the road to knowledge would not have been possible without the support and assistance of several professors who successfully conveyed their commitment to research, as well as their experience and working knowledge. I am particularly grateful to Bob Scapens and Trevor Hopper who warmly welcomed me to Manchester Business School and provided continual guidance throughout my time there. Their attention, advice and encouragement played a determining role both in the writing of my thesis and in the selection of my research discipline (control).
My thanks also go to Jean-Pierre Ponssard whose support and ability to listen provided great comfort, both on a professional and personal level, and to Laurent Bibard, who has tirelessly stood by me over the past seven years. I would also like to sincerely thank Nicolas Berland and Anne Pezet, who agreed to share their expertise and experience by doing me the honor of being on my jury. Last but not least, my thanks go to Philippe Zarlowski, who has always supported, directed and encouraged me with much kindness and compassion. I would also like to thank those exceptional women researchers who, through their courage and professionalism, opened up the way for me to follow a promising academic career.
I have in mind here Patricia Crifo, who provided invaluable support throughout my thesis and who shared her ideas, enthusiasm and friendship, Marie-Laure Djelic, who was always available to provide sound advice and to share her passion for and knowledge of research, and MarieLeandre Gomez, who never ceased to encourage and help me and whose opinion, optimism and humor proved exceptional allies at key moments of my career. Doing a thesis is also about being lucky enough to belong to a community – the PhD candidate body – whose members share their successes and failures, where solidarity surpasses boundaries and disciplines and where, ultimately, members learn and mature together. I would particularly like to thank Francois Perrot with whom I shared my dreams, my highs and my lows and who proved to be a faithful and valued travelling companion.
My thanks also go to Hae-Jung Hong, Farah Kodeih, Afshin Mehrpouya and Mahmood Shafeie Zargar, who in sharing their opinions and experiences enabled me to both discover worlds with which I was not previously familiar and to rediscover a world that I thought I knew. I would also like to thank my Swedish PhD and post-PhD friends – Katarina Buhr, Ravi Dar, Johan Gregeby and Ruben Hoffman, with whom I could share my passion for research and whose warm welcome and friendship particularly touched me. I would also like to thank my colleagues from Ecole Polytechnique, with whom I spent an exceptional year and who always remained very open-minded about my work. Friends like Vanina Forget, Samer Hobeika, 19 tel-00497342, version 2 – 8 Jul 2011 INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT
Delphine Prady and Samuel Touboul, whose routine I have been privileged and lucky enough to share these past few months. Over the past few years, I have been fortunate enough to be welcomed in four educational establishments and to have met impassioned and fascinating researchers who have all contributed one way or another to my intellectual and citizenship education. I am particularly grateful to researchers in the Accounting and Finance Group at Manchester University (UK) from whom I learnt a great deal and who knew how to pass on their interest in and knowledge of research. I would especially like to thank Sven Modell, Jodie Moll, Ted O? Leary, Jeffrey Unerman and ChunLei Yang for their valuable support and assistance during the writing of my thesis.
I am also thankful to all the researchers from the Department of Business Studies at Uppsala University (Sweden) with whom I spent many memorable moments and who made my Scandinavian trip so special, both intellectually and personally. I would especially like to thank Maria Blomgren, Henrik Dellestrand, Mikael Eriksson, Magnus Frostenson, Jaan Grunberg, Pao Kao, Agata Kostrzewa, Emilia Kvarnstrom, Josef Pallas, Firouze Pourmand, Dariusz Osowski and Linda Wedlin. Thanks also go to Social Responsibility and Sustainable Development Chair researchers at the University of Quebec, Montreal (Canada), who shared their interest and passion for social, societal and environmental issues. I would particularly like to thank Sarah Gagnon-Turcotte, Caroline Mailhot Jean Pasquero and Rosalie Vendette, who enabled me to discover new horizons in French and socially-conscious research.
Last but not least, all my thanks go to my colleagues in the Economics Department at Ecole Polytechnique, Edouard Challe, Clemence Christin, Jean-Francois Laslier, Sabine Lemoyne de Forges, Guy Meunier, Jean-Philippe Nicolai, Francois Poinas, Sylvaine Poret, Claudia Saavedra and Idrissa Sibailly who allowed me to broaden my understanding of the interest of economic science and multidisciplinary research. I maintain from these experiences the profound and private conviction that the greatest scientific and human achievements can only be accomplished within a borderless academic world. I would also like to express my sincere thanks to all those practitioners who opened their door to me and who were so free with their time. I am particularly grateful to my colleagues at MACIF Gestion who never ceased to encourage me and who continually and sincerely applied themselves to the difficult exercise of collective reflection demanded by research.
I am indebted to all the anonymous contributors to this theses, without whom nothing would have been possible: Delphine Caron, Pierre Chaize, Dominique Eugene, Laurent FabianiLagarde, Jean-Francois Gallais, Jean-Marc Grivel, Sophie Jordery, Severine Haddad, Hortense Keichinger, Francis Linger, Frederic Meschini, Rajaa Naffeti, Jean-Marie Pean, Gilles Pecaut, Caroline Raimundo, Emmanuelle Serouchni, Emmanuel Sousa, Remi Tinel, Eric Van la Beck, Daniel Ventrin, Ingrid Vidal and Thierry Wiedemann-Goiran. A CIFRE thesis is above all a team effort. Thanks also go to my kind and understanding friends who have always been there for me, enabling me to succeed at all I have attempted.
I particularly have in mind my two childhood friends, Tatiana Fovel and Morgane Trehen, who have done me the honor of being my friends for twenty years and who have always taken care to cheer me up and relieve my doubts with their laughter and optimism. I am truly grateful to Michelle Fawcett, who patently, month after month, reread, corrected and commented on my English with much kindness and confidence. I can now attest that the British stiff upper lip is no myth. I am also evidently indebted to my family who has always reacted with enthusiasm, pleasure and pride to my choices and adventures, no matter what. I was particularly moved by the 20 el-00497342, version 2 – 8 Jul 2011 ACKNOWLEDGMENTS efforts of my brothers, sisters, parents, in-laws, step and grandparents to better comprehend a different world and a foreign language. My biggest thanks, however, go to my husband, Sebastien, who for seven years has continuously supported, encouraged and helped me achieve my objectives. I garner so much strength from your love that no dream, no matter how idealistic, seems beyond reach. Last but not least, I would like to pay homage to the French and European education systems as a whole. Despite taking four years, my thesis represents the pinnacle of two decades of education. tel-00497342, version 2 – 8 Jul 2011
This research project has benefited from the following funding: Co-funding from the Ministry Responsible for Research and the European Social Fund (ESF) regarding the hiring of CIFRE women according to the objective 3 (area 5 measure 89): „Improving women’s access to the labor market.? Ph. D. tuition fees waiver from ESSEC Ph. D. Marie Curie Early Stage Researchers Fellowship at Manchester School of Accounting and Finance, funded by the European Commission. Research allocation in the Department of Economics of Ecole Polytechnique, sponsored by the Chairs Sustainable and Responsible Finance and Business Economics. 21 tel-00497342, version 2 – 8 Jul 2011 tel-00497342, version 2 – 8 Jul 2011
INTRODUCTION – EXPLAINING INSTITUTIONAL CHANGE IN THE FRENCH ASSET MANAGEMENT SECTOR: THE PHENOMENON OF ‘SRI MAINSTREAMING’ tel-00497342, version 2 – 8 Jul 2011 INTRODUCTION In the 1920s, Socially Responsible Investment (SRI) appeared further to the ethical desire of the American Quaker and Methodist movements to exclude from their portfolios companies belonging to the „sin stocks?. This referred to sectors such as alcohol, gambling, pornography, tobacco and weapons. During the 1970s, SRI was developed in Europe as a means to boycott companies that participated in apartheid in South Africa. In the 2000s, SRI appeared in France; it involved integrating non-financial criteria into investment processes to achieve better financial performance.
In 2005, the former United Nations Secretary-General, Kofi Annan, launched the Principles for Responsible Investment (PRI), an investor partnership with the United Nations Environment Program Finance Initiative and the United Nations Global Compact. One of the main purposes of the PRI was to better align investors? purposes with broader objectives of society: „By acting collectively on the basis of these principles for responsible investment, we can help protect all the world? s precious assets.? 1 (Kofi Annan, tel-00497342, version 2 – 8 Jul 2011 2005) Today, the global SRI market can be estimated at approximately €5 trillion (Eurosif, 2008).
At a time when the world is facing a financial, economic and social crisis of great amplitude, the development of SRI questions our common understanding of finance. At first sight, combining social responsibility and financial performance appeared contradictory. Certain actors thought that SRI necessarily underperformed and integrating SRI in practice was usually an uphill struggle. Evidently, financial and SRI actors were not made to understand each other. A few years later, however, no longer taking into account SRI criteria appears impossible. Today, SRI criteria seem to have always been used by asset managers. What took place in between the apparent contradiction between SRI and finance, the impossible implementation of SRI in practice and the accepted adoption of SRI criteria by asset managers?
Clearly, explaining this change requires further investigation. This is the objective of this dissertation. Following a pragmatist epistemology (Peirce, 1931; Dewey, 1938), the dissertation aims at explaining how and why SRI has been institutionalized in the French asset management sector, a phenomenon known as SRI Mainstreaming. For this purpose, it investigates the causes and the mechanisms through which SRI change has been enacted in practice. In doing so, this research contributes to the understanding of a process of institutional change in the making. The dissertation comprises three articles that should be 1 Source : Principles for Responsible Investment www. unpri. org 25
INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT considered together. This introductory chapter gives an overview of the dissertation. Section 1 introduces the phenomenon of SRI Mainstreaming. Section 2 details the research questions under study in the dissertation. Sections 3 and 4 develop the theoretical background and the research methods in-use. Lastly, section 5 gives an overview of the three articles of the dissertation. After this introductory chapter, the articles follow. Drawing on these findings, the conclusive chapter elaborates on the future of SRI Mainstreaming in the French asset management sector.
In addition, two further articles, one covering the strategic management of CO2 emissions and another the integration of Corporate Social Responsibility (CSR) concerns in the management systems of multinational companies, are provided in the appendices. Whilst they do not concern the key topic of the thesis, they build on certain field work also related to SRI issues and illustrate a number of potential impacts of this doctoral work on practices. 2 tel-00497342, version 2 – 8 Jul 2011 1. From SRI to Mainstream: The SRI Mainstreaming Phenomenon 1. 1. SRI at a Glance: The French Particularities Contrary to other countries, such as the United States, the United Kingdom or Sweden, SRI in France has never followed an ethical approach, but a financial one. Various reasons can be given to explain such a difference.
Firstly, French religious organizations and individuals have shown little interest in ethical funds. Indeed, it frequently emerges that the French mistrust stock market investments and doubt the possibility of combining ethics with finance. Part of this reluctance finds its origins in the catholic tradition of the country, which associates money with immorality. In contrast, the Protestant churches of the Nordic and Anglo-Saxon countries have catalyzed the development of finance (De Blic and Lazarus, 2007). Therefore, whereas SRI has developed in the rest of Europe since the 1970s, it has expanded into France only over the past decade. Secondly and consequently, SRI in France has not been framed by „ethical actors? such as religious organizations, but by financial actors. Thus, the first SRI funds resulted from a joint action between asset managers and 2 These articles are still projects under research, which explains why they do not have the same status as the three articles of the dissertation. 26 INTRODUCTION former financial analysts who had transformed themselves into „SRI analysts?. 3 They aimed at broadening investment horizons by restoring a long-term view in asset management and claimed that SRI would achieve better financial performance by anticipating those costs linked to a below-average performance in social, environmental and governmental domains.
Lastly, in France, SRI has benefited over the past few years from major economic and social change: the move from a retirement system almost entirely based on pay-as-you-go pension plans to a system increasingly based on funded pension plans. Aiming to shield itself from scandals such as corruption and pollution, the French government has favored the creation of a sustainable demand for SRI from public pension funds including the FRR (Fonds de Reserve des Retraites)4 and the ERAFP (Etablissement de la Retraite Additionnelle de la Fonction Publique)5 and from employee savings funds. For instance, FRR is expected to manage €152. 4 billion in 2020 (Remond, 2009), which equals 6. 3% of the 2008 French total tel-00497342, version 2 – 8 Jul 2011 assets under management.
In addition, SRI has revealed itself to be a good argument for convincing trade unions to adopt funded pension plans: SRI both guarantees the soundness of investments and maintains the role of trade unions in the management of the retirement system. History dictates that the first objective of SRI in France has been financial. SRI has been a means to achieve better financial performance by selecting the companies that anticipate the future and by protecting investors against non-financial risks. However, until now, there has been no evidence of a systematic positive (or negative) correlation between SRI and financial performance (Margolis and Walsh, 2003; Orlitsky et al. , 2003; Cavaco and Crifo, 2009; Forget, 2010).
In fact, SRI does not only follow financial concerns, it also participates in social change, known as „Sustainable Development?. This term was coined in 1987 by the World Commission on Environment and Development and refers to „development that meets the needs of the present without compromising the ability of future generations to meet their own needs? (Bruntland, 1987). Hence, SRI is also a means to restore social legitimacy in a 3 Before the 1990s, France counted a few ethical funds, although these were very marginal, both in terms of assets and numbers. Moreover, they differed to a large extent from SRI funds, which were developed later. Further details are given in the rest of the chapter. The FRR (Pension Reserve Fund) is a publicly-owned, state-funded administrative agency operating under the dual auspices of the French Minister in charge of Social Security and the French Minister in charge of the Economy and Budget. In a pay-as-you-go system that faces demographic aging challenges, it is the „fourth temporary tool? , designed to ensure that the system? s viability alongside such measures as extending the pay-in period, raising the rate of contribution, and decreasing the replacement rate. In fact, the FRR will be able to take on a portion of the expenses of basic private sector plans as of 2020, when the full impact of the demographic shock will begin to be felt. 5 French Public Service Additional Pension Scheme 27
INSTITUTIONAL CHANGE IN THE MAKING – THE CASE OF SOCIALLY RESPONSIBLE INVESTMENT sector, notably discredited by the recent financial crisis. Therefore, the purpose of SRI is twofold: to select the most socially responsible companies and to achieve better financial performance. Further details about the history and the motivations of SRI in France are given in the first article of the dissertation: „A Social Movement Perspective on Finance: How Socially Responsible Investment Mattered?. Rejecting the exclusion of sin stocks, France has favored an SRI approach known as „bestin-class?. This method of investment involves selecting the most socially responsible companies in each activity sector, whatever the sector.
Since the most socially responsible companies are deemed to be the most profitable in the long term by the tenants of SRI (UNEP-FI, 2007; FRR, 2008; Altedia IC, 2009; Mercer, 2009), this method of selection should generate better financial performance in due time. However, the absence of a systematic relationship between SRI and finan