A conceptual exploration of antecedents and outcomes of socially responsible investment in equity market

Abstract

This paper proposes a conceptual framework for socially responsible investment (SRI) in the context of equity markets with three possible antecedents of SRI - moral beliefs, demographic and economic factors. It is argued that these factors influence an investor’s portfolio choice in relation to socially responsible vis-à-vis mainstream shares through their impacts on preferences as well as the investment opportunity set. It follows from the proposed conceptual framework that (a) the SRI products may be held by any risk-averse investors regardless of their ethical standing due to potential portfolio diversification benefits; (b) investors with moral beliefs will allocate a larger proportion of their assets in SRI than their conventional counterparts as they derive non-pecuniary benefits by investing in socially responsible firms; and (c) investors willing to attain steady long-term returns on investment will exploit SRI investment opportunities. These assertions can be empirically examined in further research