Meeting objectives and resisting conventions

Abstract

Purpose – This paper seeks to unravel some of the challenges associated with responsible investment from the institutional investor's perspective, focusing on how dominant conventions influence investor behavior and their ability to invest responsibly. Design/methodology/approach – The research draws from three longitudinal case studies that were carried out on UK institutions that have adopted a responsible investment policy. Findings – Evidence of behavioral obstacles to responsible investing were found, including short-termism, gravitation towards defensible decisions and reluctance to integrate corporate responsibility factors into the core investment process. Based on the case study evidence these appear to be driven by the influence of prevailing dominant conventions, reinforced by institutional herding tendencies. Research limitations/implications – The paper introduces some preliminary thoughts as to how conventions might be resisted and changed over time through the institutional herding mechanism. Further research is required (and is currently under way) to more closely examine the potential impact of investor collaboration for challenging dominant conventions. Practical implications – Collaboration amongst institutional investors is key for mobilizing institutional herding tendencies so that responsible investment might get built into conventions. Originality/value – The research combines responsible investment literature with behavioral finance studies on investor behavior, herding tendencies and the influence of conventions. It also illuminates the complexities in investor behavior from which other institutional investors might learn in implementing a responsible investment policy.