Should pension funds’ fiduciary duty be extended to include social, ethical and environmental concerns? A study of beneficiaries’ preferences

Jansson, Magnus; Sandberg, Joakim; Biel, Anders; Gärling, Tommy

doi:10.1080/20430795.2014.928997

Cited by 24 publications

(20 citation statements)

References 60 publications

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“…SRI implies that investors are willing to accept less than optimal financial results to meet their personal values with respect to social responsibility (Renneboog et al, 2011). However, empirical results justify the conclusion that taking into account ESG information does not deteriorate the risk-return profile (see Bauer et al, 2005;Renneboog et al, 2008;Riedl and Smeets, 2017;Jansson et al, 2014;Friede et al, 2015).…”

Section: Dominant Neoclassical Investment Theory and Practicementioning

confidence: 98%

“…Other studies show that financial considerations dominate the investment choices made (Derwall et al, 2011;Renneboog et al, 2011;Riedl and Smeets, 2017;Bauer and Smeets, 2010). The extent to which socially responsible investors are willing to sacrifice financial returns is suggested to depend on their values, their socialand political preferences (Bollen, 2007;Smeets, 2010, 2015;Jansson et al, 2014;Riedl and Smeets, 2017) (Table 1).…”

Section: Behavioral Financementioning

confidence: 99%

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Value matters or values matter? An analysis of heterogeneity in preferences for sustainable investments

Delsen

Lehr

2019

Journal of Sustainable Finance & Investment

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Pension fund investments have a substantial influence on sustainability. We analyze preferences for sustainable investment among a representative cross-section of 2486 pension fund participants in the Netherlands, through a questionnaire survey fielded in the LISS panel. In contrast to standard investment theory, we find that sustainable investments are commonly favored, even if they harm financial interests. To explain variation among participants' preferences for sustainable investments, we test socio-demographic factors suggested by dominant neoclassical investment and behavioral finance theories. Moreover, we add to the existing literature by developing an alternative cultural-theoretical explanation that stresses the role of value orientations. We estimate linear and generalized ordered logit regression models, and find little support for neoclassical and behavioral finance theories, but substantial support for the importance of value orientations. Given established patterns of value-change, this finding suggests that a further increase in the demand for sustainable investments across developed economies is a likely scenario.

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Section: Dominant Neoclassical Investment Theory and Practicementioning

confidence: 98%

Section: Behavioral Financementioning

confidence: 99%

Value matters or values matter? An analysis of heterogeneity in preferences for sustainable investments

Delsen

Lehr

2019

Journal of Sustainable Finance & Investment

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“…Hence, our findings support arguments by Sethi (2005) that public pension funds' responsible investment practices are aligned with their fiduciary duty, while they do not back concerns expressed by opponents of responsible investment that "social investing subverts a fiduciary's common-law duty of undivided loyalty" and serves as a "vehicle for political mischief at the expense of the interests of taxpayers" (Rounds 2005, p. 76). As such, we contribute to a discussion in the business ethics literature that argues for a broadening of the interpretation of fiduciary duties and an expansion of the understanding of beneficiaries' interests beyond purely financial ones to entail beneficiaries' values and norms (see Richardson 2007Richardson , 2009Richardson , 2011Jansson et al 2014;Hoepner and Schopohl 2018).…”

Section: Introductionmentioning

confidence: 99%

State Pension Funds and Corporate Social Responsibility: Do Beneficiaries’ Political Values Influence Funds’ Investment Decisions?

Hoepner

Schopohl

2019

J Bus Ethics

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This study explores the underlying drivers of US public pension funds' tendency to tilt their portfolios towards companies with stronger corporate social responsibility (CSR). Studying the equity holdings of large, internally managed US state pension funds, we find evidence that the political leaning of their beneficiaries and political pressures by state politicians affect funds' investment decisions. State pension funds from states with Democratic-leaning beneficiaries tilt their portfolios more strongly towards companies that perform well on CSR issues, and this tendency is intensified when the state government is dominated by Democratic state politicians. Moreover, we find that funds which tilt their portfolios towards companies with superior CSR scores generate a slightly higher return compared with their counterparts. Overall, our findings indicate that funds align their investment choices with the financial and non-financial interests of their beneficiaries when deciding whether to incorporate CSR into their equity allocations.

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“…On the other hand, extant research shows that employees and private persons find pension issues difficult and confusing. Generally, they do not make active pension investment choices, or they are not well informed about the consequences of their pension investments or how their employers invest their pensions, so they have to trust others (e.g., Harrison et al, 2006;Hauff, 2014;Jansson et al, 2014). In our pre study we found that the vast majority of the SME's in the population choose a moderate risk profile for all employees, despite press articles from pension experts suggesting that younger employees should choose a more offensive and that older employees should choose a more cautious profile.…”

Section: Discussion -Implicationsmentioning

confidence: 99%

“…Moreover, extant research indicates that most employees do not know how employers invest their deposits (Harrison et al, 2006). Similarly, Hauff (2014) and Jansson et al (2014) find that individuals generally have limited knowledge about their future pensions, which in turn affect their willingness to take on financial risks.…”

Section: Buying Csr With Employees' Pensions? the Effect Of Social Rementioning

confidence: 99%

Buying CSR with employees’ pensions? The effect of social responsible investments on Norwegian SMEs’ choice of pension fund management

Biong

Silkoset

2017

IJBM

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PurposeEmployees often expect an emphasis on financial aspects to be predominant when their employers choose a fund management company for the investment of employees' pension fund deposits. By contrast, in an attempt to appear as socially responsible company managers may emphasize social responsibility in pension fund choices. This study examines to what extent managers for small and medium sized companies emphasize social responsibility (SR) vs. expected returns when choosing investment managers for their employees' pension funds. Design/methodology/approachA conjoint experiment among 276 Norwegian SMEs' decision makers examines their tradeoffs between social and financial goals in their choice of employees' pension management.Furthermore, the study examines how the companies' decision makers' characteristics influence their pension fund management choices. FindingsThe findings show that the employers placed the greatest weight to suppliers providing funds adhering to socially responsible investment (SRI) practices, followed by the suppliers' corporate brand credibility, the funds' expected return, and the suppliers' management fees.Second, employers with investment expertise emphasized expected returns and downplayed social responsibility in their choice, whereas employers with stated CSR-strategies downplayed expected return and emphasized SR. Originality/valueChoice of supplier to manage employees' pension funds relates to a general discussion on whether companies should do well -maximizing value, or do good, -maximizing corporate social responsibility. In this study, doing well means maximizing expected returns and minimizing costs of the pension investments, whereas doing good means emphasizing SRI in this choice. Unfortunately, the employees might pay a price for their companies' ethicality as moral considerations may conflict with maximizing the employees' pension fund value.

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Should pension funds’ fiduciary duty be extended to include social, ethical and environmental concerns? A study of beneficiaries’ preferences

Cited by 24 publications

References 60 publications

Value matters or values matter? An analysis of heterogeneity in preferences for sustainable investments

Value matters or values matter? An analysis of heterogeneity in preferences for sustainable investments

State Pension Funds and Corporate Social Responsibility: Do Beneficiaries’ Political Values Influence Funds’ Investment Decisions?

Buying CSR with employees’ pensions? The effect of social responsible investments on Norwegian SMEs’ choice of pension fund management

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