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What matters for socially responsible investment (SRI) in the natural resources sectors? SRI mutual funds and forestry in North America

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  • William Nikolakis
  • David H. Cohen
  • Harry W. Nelson

Abstract

Socially responsible investment mutual funds have played an active role in encouraging sustainability in the natural resources sectors, particularly in North America's forest industry which tends to be reactive in adopting sustainable practices. A survey of socially responsible investment mutual funds in Canada and the US was first undertaken in 2006 and then replicated in 2010--11 to understand the implications of this growing investment practice on the natural resources sector, with a focus on forestry. While we did not expect to find a convergence in environmental, social or governance criteria among funds, this study found that environmental criteria are most important to respondents in evaluating natural resource stocks, and that this is stable over time and consistent according to fund size. Governance criteria became prominent in 2010--11, perhaps a result of the Global Financial Crisis. These results build on literature examining the investment evaluation process for socially responsible mutual funds. What the findings highlight is that evaluation criteria are dynamic, responding to changing attitudes and firms should consider this in developing their sustainability agenda. Some socially responsible mutual funds have played a unique role in the forest sector, working collectively with Non-Government Organisations and civil actors to influence forest companies to improve sustainability, and have divested shares in forest companies that do not comply with their demands. Our results improve understanding for what is important to socially responsible mutual funds in evaluating the forest sector. The study shows a decline in importance for forest certification over the period and that the Forest Stewardship Council scheme is viewed as most credible by respondents. However, poor financial returns in the forest sector may constrain further attention from socially responsible mutual funds.

Suggested Citation

  • William Nikolakis & David H. Cohen & Harry W. Nelson, 2012. "What matters for socially responsible investment (SRI) in the natural resources sectors? SRI mutual funds and forestry in North America," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 2(2), pages 136-151, May.
    • Handle: RePEc:taf:jsustf:v:2:y:2012:i:2:p:136-151
    DOI: 10.1080/20430795.2012.690724
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    Cited by:

    1. Grace B. Villamor & Lisa Wallace, 2024. "Corporate social responsibility: Current state and future opportunities in the forest sector," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 3194-3209, July.
    2. Suborna Barua & Micol Chiesa, 2019. "Sustainable financing practices through green bonds: What affects the funding size?," Business Strategy and the Environment, Wiley Blackwell, vol. 28(6), pages 1131-1147, September.
    3. Magdalena Ziolo & Beata Zofia Filipiak & Iwona Bąk & Katarzyna Cheba & Diana Mihaela Tîrca & Isabel Novo-Corti, 2019. "Finance, Sustainability and Negative Externalities. An Overview of the European Context," Sustainability, MDPI, vol. 11(15), pages 1-35, August.
    4. Magdalena Ziolo & Beata Zofia Filipiak & Iwona Bąk & Katarzyna Cheba, 2019. "How to Design More Sustainable Financial Systems: The Roles of Environmental, Social, and Governance Factors in the Decision-Making Process," Sustainability, MDPI, vol. 11(20), pages 1-34, October.

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