The Business of Virtue: Evidence from Socially Responsible Investing in Financial Markets

Using the mainstreaming of socially responsible investing (SRI) as our empirical context, we show that as the divestment movement in the late twentieth century got institutionalized by being incorporated as a business strategy into more mainstream financial instruments like mutual funds, the prior meanings and categorical definition of ethical investing became ambiguous due to fuzzy boundaries, duality of virtue inherent in the portfolio targets, and exercise of discretion by portfolio managers. We find that increased heterogeneity in standards led to greater ambiguity about who belongs to a category, and fund managers adopted distinct measures-based, values-based and expertise-based approaches to resolve this ambiguity. One consequence of such ambiguity is that individual self-expression, self-consciousness and agency that are central in such movements become appropriated by discretionary and meaning-making work at the institutional level.

Automated summary

Through the mainstreaming of socially responsible investing (SRI), it is shown that the institutionalization of the divestment movement in the late twentieth century has led to ambiguity in the prior meanings and categorical definitions of ethical investing. This ambiguity has resulted in fund managers adopting different approaches to resolve the ambiguity and has also shifted individual self-expression and agency towards institutional discretion and meaning-making work.