More and more, companies’ shareholders are being proactive in questioning the management of companies regarding alleged human rights and environmental abuses. Indeed, shareholders of companies can exert a lot of influence due to their capacity to question the company’s board and their influence on management through the threat to disinvest.
If a company’s shares are traded on a stock exchange, the company must abide by the laws and regulations of the country of jurisdiction applicable to the said stock exchange. Most countries around the world have implemented common laws to protect shareholders’ interests which range from financial reporting to disclosure of information. each shareholder is a joint owner of the company in which he/she owns shares. Shareholders may be individuals, shareholder associations, institutional shareholders, NGOs, managers of socially responsible investment funds, etc. Over the past few years, many shareholders have shown growing concern for the social and environmental practices of the companies in which they invest. Religious groups which are important investors have played a pioneering role in the development of socially responsible investment or investing (SRI). For instance, the group Interfaith Center on Corporate Responsibility which is based in New York and represents 300 institutional shareholders (syndicates, religious groups, etc.) has been particularly influential in the United States.
Socially responsible investment (SRI) takes into account ethical, social and environmental criteria in financial management. Over the last couple of years, the interest in SRI has increased considerably especially in the United States, Canada and Europe. Institutional investors, particularly pension funds, were among the first to exert pressure to take ethical criteria into consideration when investing. Financial scandals, the changes in legislation concerning the disclosure of information as well as the concern shown by investors explain the growth of socially responsible investment funds 1 .
SRI can take different forms:
- the adoption of principles and codes of conduct which favour responsible investing;
- SRI or sustainable development funds;
- funds with a negative screening element;
- Shareholder advocacy or activism;
- Thematic funds.