research@hec - Issue #17 - (Page V)

MATURITY Nowadays, Arjaliès says there are two main trends. On one hand, SRI is continuing to penetrate and merge with the market, and on the other, more radical SRI approaches are emerging. Contrary to the first wave of movements, they advocate placing the social responsibility component of investment above financial reasoning. “These movements tend to focus on specific issues like human resources, shareholder activism, and emerging countries, and they push to favor non-financial matters over financial issues.” They respond to demands of institutional investors who would like to diversify their positions while also boosting their image and protecting themselves from social (i.e., child labor) or environmental scandals. As a result, in early 2010, nearly 70 “ethical funds” (term used by Novethic) had been created in France. THE IMPACT OF THE SRI MOVEMENT ON FINANCIAL INSTITUTIONS The SRI movement has profoundly changed the French asset management landscape. According to a late 2009 Novethic report, 90% of “conventional” French funds included at least one SRI criterion, compared to 61% at the end of 2008 and 3% in late 2007. Arjaliès also shows that, contrary to popular belief, the effectiveness of social movements does not necessarily depend on strong action from people outside of the system. In the case of French SRI, changes were driven by insiders in the asset management sector. This is why their initiatives do not strive to radically oppose traditional ideas of financial profitability, and this compromise between profitable and responsible investments is the primary reason behind their success. Arjaliès APPLICATIONS FOR REGULATORS • Arjaliès’ study of the evolution of the SRI movement since the late 1990s and its impact on the financial sector shows how social movements can influence economic institutions and highlights key conditions for success. • Arjaliès also provides unprecedented insight on the dynamics of SRI offer and demand. This issue is particularly significant, as the Financial Market Authority is currently considering establishing specific regulations for this type of fund. 1. Now Vigeo, since 2002. Pension Funds. 2. Law on New Economic Regulations. ness Ethics, spring 2010). 3. Association of Institutions for Complementary Executive article, “A Social Movement Perspective on Finance: How 4. Association for Complementary Employee Pension Plans. Based on an interview with Diane-Laure Arjaliès and on her Socially Responsible Investment Mattered” (Journal of Busi- also explains that despite frequent criticism of CSR assets (i.e., fair trade), the SRI movement does not stem from commercial concerns but from a few people’s desire to bring radical change to financial institutions. She supports this hypothesis saying, “Defenders of SRI have gotten personally involved in making the movement a success even when they have had nothing to gain financially by doing so.” Indeed, it took several years for SRI to attract the interest of the financial community. But the situation has changed, and the growth potential now associated with developing SRI is so huge, that no bank would risk not proposing this type of fund to its customers. I sustainable finance z METHODOLOGY The first phase of Diane-Laure Arjaliès’ research was based on participative observation and was conducted from within the French SRI movement from 2006 to 2007. During this time, Arjaliès identified approximately 30 key players in the SRI movement and then questioned them in semi-directive interviews. The information gather was compared with quantitative data on the development of SRI on the French financial market. october-november 2010 • research@hec V

Table of Contents for the Digital Edition of research@hec - Issue #17

Cover & Contents
How to Find Good Crisis Leaders before Trouble Strikes
Impact of Social Movements on Financial Institutions
European Law: The Impact of Soft Law on the Courts
The Economic Impact of Academic Entrepreneurship

research@hec - Issue #17