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The challenges of responsible investment mainstreaming : beliefs, tensions and paradoxes

Christel Dumas (UGent)
(2015)
Author
Promoter
(UGent) and Céline Louche
Organization
Abstract
The mainstreaming of responsible investment (RI) is an aspirational notion introduced by practitioners to promote the inclusion of ESG (environmental, social and governance) criteria in institutional investor’s decision process. This mainstreaming, though undefined so far, is characterized by new actors in RI and new tools, which should lead to an increase in RI assets under management. But mainstreaming brings along new challenges for RI in terms of legitimacy and practices. The belief that business and market-based strategies will bring positive social and ecological change is far from natural, and results in tensions. Reconciling such different logics as maximizing shareholder return and aligning investors with broader objectives for society, provokes a transformation of RI, leading to paradoxes. To overcome the difficulties associated with RI’s mainstreaming, researchers increased their attempts to demonstrate the value of RI for institutional investors. To do so, most literature on RI, and on the value of sustainability in general, adopts a neoclassical approach focusing on financial return, with inconclusive results. This thesis set out to explore the challenges of RI mainstreaming in terms of beliefs, tensions and paradoxes. By adopting a new theoretical perspective this thesis seeks to develop a nuanced, critical understanding of RI mainstreaming. Specifically, it seeks to answer four questions: (1) “What are the collective beliefs for responsible investment and how have they evolved over time?” (2) “What are the disputes and resolutions around responsible investment’s mainstreaming?” (3) “What tensions are embedded in RI mainstreaming and through which arrangements are they coped with?”, and (4) “What are the ESG factors most relevant for a company’s market risk, depending on its sector?” The first study focuses on the content of collective beliefs (Orléan, 2006) through five periods of RI. The data revealed the existence of RI’s “civil rights” years (1982-1991), “green niche” years (1992-1997), “professionalization” years (1998-2000), “SRI” years (2001-2004) and “ESG” years (2005-ongoing). This study followed the evolution of multiple collective beliefs over time to identify two distinct categories of collective beliefs – justifying RI and practicing RI—that characterize how mainstream actors collectively make sense of RI. The second study goes further into “justifying RI”, and contributes to research on processes of legitimacy using convention theory (Boltanski & Thévenot, 2006) to understand ESG challenges. A discourse analysis of UK press shows that RI focuses on appealing to conventional finance with a market logic, resulting in very few challenges of the legitimacy of the existing institutional order. Indeed, by referring to the dominant worlds of worth, RI validates them and strengthens the existing compromise. The third and fourth study deal with “practicing RI”. They complete the investigation with an empirical, data driven and investor-oriented approach. Study three provides evidence of the variety of tensions present in the process of RI mainstreaming and of the coping mechanisms used to deal with the tensions in practice, namely framing, shifting, transcending and defending the arrangement. We see that while tensions are inherent in organizational systems, they are constructed as paradoxes by the actors involved with them. A duality of “contradictory, yet interrelated elements” (Smith & Lewis, 2011) is not a paradox if it is not acknowledged and treated as such by those subject to it. The fourth study analyses the link between sustainability and risk, measured by downside deviation. The results show that ESG metrics matter for market risk, particularly when measured by semi-deviation, but without any predictive power on the magnitude of future risk's reduction. The most relevant factors to reduce a company’s market volatility vary from one industry to another.
Keywords
collective beliefs, ESG, mainstreaming, paradoxes, responsible investment

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MLA
Dumas, Christel. “The Challenges of Responsible Investment Mainstreaming : Beliefs, Tensions and Paradoxes.” 2015 : n. pag. Print.
APA
Dumas, C. (2015). The challenges of responsible investment mainstreaming : beliefs, tensions and paradoxes. Ghent University. Faculty of Economics and Business Administration, Ghent, Belgium.
Chicago author-date
Dumas, Christel. 2015. “The Challenges of Responsible Investment Mainstreaming : Beliefs, Tensions and Paradoxes”. Ghent, Belgium: Ghent University. Faculty of Economics and Business Administration.
Chicago author-date (all authors)
Dumas, Christel. 2015. “The Challenges of Responsible Investment Mainstreaming : Beliefs, Tensions and Paradoxes”. Ghent, Belgium: Ghent University. Faculty of Economics and Business Administration.
Vancouver
1.
Dumas C. The challenges of responsible investment mainstreaming : beliefs, tensions and paradoxes. [Ghent, Belgium]: Ghent University. Faculty of Economics and Business Administration; 2015.
IEEE
[1]
C. Dumas, “The challenges of responsible investment mainstreaming : beliefs, tensions and paradoxes,” Ghent University. Faculty of Economics and Business Administration, Ghent, Belgium, 2015.
@phdthesis{6952215,
  abstract     = {The mainstreaming of responsible investment (RI) is an aspirational notion introduced by practitioners to promote the inclusion of ESG (environmental, social and governance) criteria in institutional investor’s decision process. This mainstreaming, though undefined so far, is characterized by new actors in RI and new tools, which should lead to an increase in RI assets under management. But mainstreaming brings along new challenges for RI in terms of legitimacy and practices. The belief that business and market-based strategies will bring positive social and ecological change is far from natural, and results in tensions. Reconciling such different logics as maximizing shareholder return and aligning investors with broader objectives for society, provokes a transformation of RI, leading to paradoxes. 
To overcome the difficulties associated with RI’s mainstreaming, researchers increased their attempts to demonstrate the value of RI for institutional investors. To do so, most literature on RI, and on the value of sustainability in general, adopts a neoclassical approach focusing on financial return, with inconclusive results. This thesis set out to explore the challenges of RI mainstreaming in terms of beliefs, tensions and paradoxes. By adopting a new theoretical perspective this thesis seeks to develop a nuanced, critical understanding of RI mainstreaming. Specifically, it seeks to answer four questions: (1) “What are the collective beliefs for responsible investment and how have they evolved over time?” (2) “What are the disputes and resolutions around responsible investment’s mainstreaming?” (3) “What tensions are embedded in RI mainstreaming and through which arrangements are they coped with?”, and (4) “What are the ESG factors most relevant for a company’s market risk, depending on its sector?”
The first study focuses on the content of collective beliefs (Orléan, 2006) through five periods of RI. The data revealed the existence of RI’s “civil rights” years (1982-1991), “green niche” years (1992-1997), “professionalization” years (1998-2000), “SRI” years (2001-2004) and “ESG” years (2005-ongoing). This study followed the evolution of multiple collective beliefs over time to identify two distinct categories of collective beliefs – justifying RI and practicing RI—that characterize how mainstream actors collectively make sense of RI.
The second study goes further into “justifying RI”, and contributes to research on processes of legitimacy using convention theory (Boltanski & Thévenot, 2006) to understand ESG challenges. A discourse analysis of UK press shows that RI focuses on appealing to conventional finance with a market logic, resulting in very few challenges of the legitimacy of the existing institutional order. Indeed, by referring to the dominant worlds of worth, RI validates them and strengthens the existing compromise.
The third and fourth study deal with “practicing RI”. They complete the investigation with an empirical, data driven and investor-oriented approach. Study three provides evidence of the variety of tensions present in the process of RI mainstreaming and of the coping mechanisms used to deal with the tensions in practice, namely framing, shifting, transcending and defending the arrangement. We see that while tensions are inherent in organizational systems, they are constructed as paradoxes by the actors involved with them. A duality of “contradictory, yet interrelated elements” (Smith & Lewis, 2011) is not a paradox if it is not acknowledged and treated as such by those subject to it. The fourth study analyses the link between sustainability and risk, measured by downside deviation. The results show that ESG metrics matter for market risk, particularly when measured by semi-deviation, but without any predictive power on the magnitude of future risk's reduction. The most relevant factors to reduce a company’s market volatility vary from one industry to another.},
  author       = {Dumas, Christel},
  keywords     = {collective beliefs,ESG,mainstreaming,paradoxes,responsible investment},
  language     = {eng},
  pages        = {227},
  publisher    = {Ghent University. Faculty of Economics and Business Administration},
  school       = {Ghent University},
  title        = {The challenges of responsible investment mainstreaming : beliefs, tensions and paradoxes},
  year         = {2015},
}