A MOTIVATION PUZZLE: CAN

INVESTORS CHANGE CORPORATE

BEHAVIOR BY CONFORMING TO
ESG PRESSURES?

Kyoko Sakuma-Keck and Manuel Hensmans

ABSTRACT

Purpose The financial crisis has exposed a behavioral paradox:

although asset managers are putting significant effort into meeting insti-
tutional pressures to demonstrate transparency and responsible behavior,
their actual investment behaviors seem to remain inconsistent with
responsible ownership. We seek to understand asset managers’ motiva-
tions to use externally defined environment, social, and governance
(ESG) information to engage in sustainable investment.
Methodology/approach We draw on insights from the sensemaking
literature, as well as institutional, behavioral, and cognitive theories to
shed new light on asset managers’ motivations to demonstrate confor-
mance with ESG criteria.
Findings The more asset managers demonstrate conformance, the
less likely they are to make an effort to integrate sustainability and

Institutional Investors’ Power to Change Corporate Behavior: International Perspectives

Critical Studies on Corporate Responsibility, Governance and Sustainability, Volume 5, 367 393
Copyright r 2013 by Emerald Group Publishing Limited
All rights of reproduction in any form reserved
ISSN: 2043-9059/doi:10.1108/S2043-9059(2013)0000005023
367
368 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

long-term, return-making concerns in their investment behaviors. As a

result of the organization’s decoupling strategy, asset managers who are
obliged to justify responsible behavior tend to have a limited sense of
responsibility for encouraging long-term changes in corporate behavior.
Practical implications We argue that calls for greater transparency in
investment decisions under the guise of demonstrating conformance to
ESG information requirements will not lead to more sustainable invest-
ment behavior.
Originality/value This chapter challenges the assumption in the
sustainable investment literature that the common use of ESG criteria
enables investors to pressure and empower companies in the long term.
Keywords: Sustainable investment; institutional pressures; motiva-
tions; ESG information

INTRODUCTION

The importance of sustainable investment practices has grown considerably

in recent years. Growth in the sustainable investment market in Europe is
particularly remarkable. In December 2009, the market reached approxi-
mately EUR 5 trillion asset under management, which was 15 times greater
than in December 2002 (Eurosif, 2010). Two parallel factors have driven
this growth: public calls for investor transparency (Holland, 2011a) and
emergence of specialized research agencies. Crucially, these agencies collect
corporate performance data on environment, social, and governance (ESG)
issues and sell them on a standardized format (Corno, Fossati, & Simioni,
2005; Louche, 2004). Recently, sell-side research, financial news, and mar-
ket-index providers have joined the ESG data-provision market, where
they aim to encourage mainstream asset managers to engage in the new
investment field. Over time, sustainable investment seems to be becoming
more about investors’ demonstration of commitment to ESG criteria than
about changing corporate behavior (Gray, 2012; Guyatt, 2006; Kemna &
van de Loo, 2009; Louche, 2004). Indeed, the OECD (2011) recognizes
ESG investing as “a new asset class” (p. 49). Similarly, Eurosif (2012)
defines sustainable investment as asset managers’ strategic processes for
incorporating ESG criteria into investment decisions “regardless of their
motivations to do so” (p. 10).
Investor Motivations to Integrate ESG 369

Remarkably, the academic community has not challenged practitioners’

motivations to engage in sustainable investment. Dominant assumptions
imply that ESG information enables asset managers generally focused on
short-term returns to collectively incorporate long-term issues into their
decisions (Amaeshi & Grayson, 2008; Bourghelle, Jemel, & Louche, 2009;
Eccles, Krzus, & Serafeim, 2011; Guyatt, 2006; Lewis & Juravle, 2010).
Practitioner surveys support this view: a lack of reliable and comparable
ESG information is viewed as a major obstacle to the mainstreaming of sus-
tainable investment (BSR, 2009; EABIS, 2009; Jaworski, 2007; McKinsey,
2009). Moreover, the European Commission, fueled by the recent financial
crisis, has endorsed membership of asset owners and managers in the
United Nations Principles for Responsible Investment (UN PRI) with the
intention of mandating ESG reporting by asset managers (European
Commission, 2011).
This chapter challenges the dominant assumption (Sandberg &
Alvesson, 2011) that the common use of ESG language enables investors to
pressure and empower companies to act responsibly. We draw on sense-
making theory (Weick, 1988, 1993, 1995; Weick, Sutcliffe, & Obstfeld,
2005) to suggest that ESG adoption without ownership motivations is
likely to create an oversight vacuum. Asset managers may be motivated in
the short term to demonstrate conformance to ESG criteria in their invest-
ments. In this regard, sensemaking theory predicts that asset managers who
face internal changes will look for reasons why their organizations engage
in sustainable investment (Weick et al., 2005). In other words, asset man-
ager making sense of the use of ESG information gives substance to the
unfolding meaning of sustainable investment. We draw on the unexplored
sensemaking perspective to shed light on the counterintuitive motivations
of managers adopting ESG criteria in their investment strategies.
Our theoretical enhancement of our knowledge of asset managers’ moti-
vations is timely and urgent. The focus on sustainable investment continues
to soar, while there is a sense that the irresponsibility and short-termism of
financial institutions continues (Gray, 2012). Various media outlets high-
light the fund management industry’s continued lack of interest in the
corporate governance of the companies in which they invest in terms of
creating long-term value,1 and conflicts of interest pervade as institutions
strive to ensure their own benefits.2 Furthermore, investment practices that
focus on sustainability and responsibility have largely been practitioner
driven (Juravle & Lewis, 2008). Therefore, an understanding of the under-
lying motivations of practitioners appears critical if policy makers are to
change the long-term behaviors of market participants.
370 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

The remainder of this chapter is organized as follows. First, we review

the dominant assumptions found in sustainable investment research.
Second, we examine the sensemaking literature to gain insights into why
actors are motivated to adopt external logics to fulfill institutional require-
ments. We also propose a conceptual framework that improves our under-
standing of asset managers’ conformance and their apparent motivations in
times of social change. Subsequently, we develop several propositions based
on the conceptual framework. Finally, we conclude with a discussion of
policy implications and suggestions for future research.

DOMINANT ASSUMPTIONS IN THE SUSTAINABLE

INVESTMENT LITERATURE

Most sustainable investment research views the use of ESG information

as desirable under the assumption that it mitigates investors’ gravitation
toward short-term goals (Guyatt, 2006; Juravle & Lewis, 2008) and
promotes an ESG belief (Bourghelle et al., 2009; Dumas & Louche, 2011;
Jemel-Fornetty, Louche, & Bourghelle, 2011). These scholars assume that
convergence to a new collective belief is necessary to engineer a transition
to a state in which asset managers will actively engage in changing undesir-
able corporate behaviors.

A New ESG Belief to Overcome Behavioral Biases

In the behavioral theory perspective, ESG data is seen as a tool that can be
used to overcome the biases associated with relying on common rules of
thumb (Hirshleifer, 2001; Tversky & Kahneman, 1974), mimicking others
(Grinblatt, Titman, & Wermers, 1995; Sias, 2004), and safeguarding one’s
own reputation (Scharfstein & Stein, 1990). However, drawing from beha-
vioral finance and convention theory, Guyatt (2005) finds that institutional
investors adopt a defensive, risk-minimizing attitude that induces them
to “maximiz[e] the degree of out-performance relative to the benchmark”
(p. 142). In the financial market, where modern portfolio theory, the effi-
cient market hypothesis, and the fiduciary duty of financial returns remain
dominant beliefs (Juravle & Lewis, 2008), institutional investors generally
doubt the merits of ESG integration. Hence, these institutions hire and
build specialist internal sustainability teams, but leave the core investment
Investor Motivations to Integrate ESG 371

teams and the overall investment processes largely intact (Guyatt, 2005;
Kemna & van de Loo, 2009). In effect, this marginalization of “sustainable
investment” creates another layer of interest misalignment in the invest-
ment chain.
The OECD (2011) and Kemna and van de Loo (2009) argue that this
lengthening of investment chain hinders asset managers’ adoption of long-
term objectives. When asset owners and asset managers move apart as a
result of the former’s issuance of external mandates, the latter tend to focus
on their own interests at the expense of asset owners and companies
(OECD, 2011). The internal friction that arises between sustainability
specialists and core investment teams, combined with the focus on short-
term profit seeking, leads to a failure to consider “the mindset of owners”
(Kemna & van de Loo, 2009, p. 15). In the end, asset managers become
disengaged from long-term ownership interests, even if they hold shares for
an extended period (Guyatt, 2006; Juravle & Lewis, 2008; Kemna & van de
Loo, 2009; OECD, 2011).
To overcome such behavioral obstacles to long-term objectives, these
scholars argue that a reform must start at “home”: asset management
companies must integrate ESG into their core investment philosophies and
their teams. In particular, they must replace the internal belief that above-
average performance is a matter of luck (Fama, 1998) with a belief that the
active use of ESG information in corporate analysis and governance moni-
toring will enhance returns (Guyatt, 2006; Juravle & Lewis, 2008).

Convergence Toward ESG Integration as a Success Factor

In the neo-institutional perspective, coercive, mimetic, and normative

pressures to use ESG information are believed to enable asset managers
to converge toward best practices. Drawing from the new institutional
(DiMaggio & Powell, 1983; Meyer & Rowan, 1977) and resource-
dependency theories (Oliver, 1991), Louche (2004) identifies a normative
force exerted by ESG information providers: asset managers become
dependent on the providers’ rating model that evaluates companies’ social
responsibility. In essence, asset managers gain legitimacy in exchange for
dependency on the sustainable investment institution.
Furthermore, isomorphic and mimetic pressures have yielded notable
convergence in the use of sell-side ESG reports, membership in the
UN PRI, and ESG integration methodologies (Bourghelle et al., 2009;
DiMaggio & Powell, 1983). Job transfers through the European Federation
372 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

of Financial Analysts Society (EFFAS) have further diffused ESG knowl-

edge among financial analysts, while the business school community has
promoted a common ESG language among investors and companies
(Bourghelle et al., 2009). These scholars suggest that the sharing of knowl-
edge, models, and methodologies related to ESG integration through a new
institutional network enhances sustainable investment’s social legitimacy
(Meyer & Rowan, 1977). Although the adoption of the new practice of
ESG integration takes time, governments can accelerate the process.
Legislative initiatives provide “a significant signal to the financial commu-
nity that these issues are more than a temporary trend” (Bourghelle et al.,
2009, p. 23).
The assumption that convergence toward “the new paradigm in finance”
is a success factor reinforces the first assumption that the adoption of ESG
information is a key enabler for the reversal of the short-term investment
focus (Dumas & Louche, 2011; Jemel-Fornetty et al., 2011; Sun, Louche, &
Pérez, 2011, p. 14). Old conventions are so permeating that we need to
overhaul the financial data-only decision-making to replace it with a new
convention: the ESG convention in which asset managers seek enhance
return by adopting the ESG information.

A Need for Better ESG Data for Company Engagement

Finally, behavioral and normative assumptions suggest that mandatory

corporate disclosure of ESG data conditions investors’ understanding of
companies. Information deficits, such as insufficient corporate reporting
and time lags between specific ESG-related events and information dis-
semination, hamper investors’ abilities to identify risks and opportunities
(Sullivan & Mackenzie, 2006). Moreover, asset managers struggle to ade-
quately consider long-term aspects when comparable, reliable, and accurate
information that captures companies’ intangibles is lacking (Amaeshi &
Grayson, 2008; Eccles et al., 2011). Intangibles include not only tradition-
ally understood value-creating assets, such as client trust, reputation,
relationships, networks (Fahy, 2000), team-embodied knowledge, organiza-
tional culture, and history (Clulow, Gerstman, & Barry, 2003), but also
such elements as human rights, accountability, governance, and any
other value-creating or destroying factor (BSR, 2006). In particular, volun-
tary corporate disclosure allows companies to “cherry-pick” information
on positive, value-creating aspects (Eccles et al., 2011), while they can
avoid releasing information on negative developments (McKinsey, 2009).
Investor Motivations to Integrate ESG 373

The European Commission’s recent legislative initiative is based on this

assumption. It seeks companies to disclose a wide range of ESG informa-
tion in order to enable asset managers and financial analysts to better
comprehend the whole picture of a company and to compare it to its peers
(European Commission, 2011).
In sum, the dominant assumptions in sustainable investment research
support the view that investors must utilize ESG information in their
investment strategies if they are to empower and pressure companies to
focus on long-term returns. Through speaking the same ESG language,
investors are able to effectively challenge corporate misconducts and
support the value creation.

THE USE OF ESG INFORMATION THROUGH A

SENSEMAKING LENS
Despite these assumptions, which are dominant in the extant literature, we
suggest that pressuring asset managers to use ESG information may not
effectively lead to the implementation of lasting, sustainable conduct
among companies. From the sensemaking perspective, learning and adap-
tation effectively depend on the motivation and capacity of asset managers
to give substance to “sustainable” investment practices. In this regard,
sensemaking scholars have long studied the processes through which
organizational members shape external and internal social change (Gioia &
Chittipeddi, 1991; Weick, 1988, 1993, 1995; Weick et al., 2005). The under-
lying view of these scholars is that organizational adaptation can be best
studied in terms of leaders’ and members’ ongoing cognitive processes
(Weick, 1988, 1995). Sensemaking occurs when organizations face a crisis
or unexpected events (Weick, 1988), as “people look for reasons that will
enable them to resume the interrupted activity and stay in action” at such
times (Weick et al., 2005, p. 409). These plausible stories, which are devel-
oped in a disruptive state, capture the transient and unfolding reality of
organizational life (Weick, 1988; Weick et al., 2005).
Based on Weick’s (1988, 1995) perspective, Gioia and Chittipeddi
(1991) propose that leaders not only make sense (understand and cognize)
of a strategic change but also give sense (influence and act) to that
change. Leaders who understand the external stakeholders’ requirements
are motivated to “provide a viable interpretation to a new reality and
to influence stakeholders and constituents to adopt it as their own”
374 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

(Gioia & Chittipeddi, 1991, p. 443). This sequence of sensemaking and

sensegiving is evident in each echelon of an organization as it unlocks the
meaning of a strategic change: leaders “envision” by making sense of the
new situation, then “signal” by communicating the new vision. Members’
then attempt to “re-vision” their understanding and to “energize” by acting
in accordance with the vision (Gioia & Chittipeddi, 1991).

Leaders’ Sensegiving of Transparency Pressures: Reorienting Strategy

The recent rise in sustainable investment and the growing discourse on ESG
appear to reflect the disruptive state evident in financial institutions today.
Sustainable investment evolved from a niche activity among moral leaders
in the United States to a commercial project embraced by European institu-
tional investors in the 1990s (Louche, 2004). Simultaneously, public distrust
in financial institutions grew, as they branded innovative products as
“sustainable,” but were later implicated in human rights and environmental
scandals.3 In the United Kingdom, this led first to a countrywide campaign
against a large pension fund to adopt a socially responsible policy,4
which in turn led to a more general European call for transparency. In
responding to the mounting pressure for transparency and accountability,
financial institutions have magnified the ESG discourse (Holland, 2011a).
The 2008 2010 financial crisis further fueled this call for transparency,
as a number of the banks and insurance companies that were involved in
subprime lending and structured loans were bailed out by the government
at the expense of taxpayers in many European countries. Financial institu-
tions struggled to maintain their reputations, as their ownership and control
became a regulatory focus (Sakuma, 2012).5
When attempting to undertake sensemaking and sensegiving for sustain-
able investment, the top management of asset management companies
must first make sense of external pressures and then signal its understand-
ing of those pressures. Top managers may introduce ESG integration as a
new belief in order to enhance their reputation and gain legitimacy from
the angry public, or they may disclose ESG criteria and policies in order to
justify compliance with stakeholder requirements. Alternatively, manage-
ment may set an underlying goal of sustainable investment (e.g., ensuring
better returns by preparing the company for the long term) as part of com-
pany strategy and as an internal value (Basu & Palazzo, 2008).
However, Gioia and Chittipeddi (1991) suggest that leaders’ legitimacy-
and justification-seeking grounds for adopting institutional logics may
Investor Motivations to Integrate ESG 375

impede their successful long-term adaptation. This is because organiza-

tional members who are unable to make sense of leaders’ proposed vision
will struggle to act in accordance with the new vision (Gioia & Chittipeddi,
1991). In other words, asset managers may not be able to make sense of
sustainability in terms of making better returns as long as their top man-
agement only cosmetically adopts ESG beliefs.

Asset Managers’ Sensegiving: Promoting Sustainable Investments

On another level, asset managers themselves can instigate strategic changes

(Maitlis, 2005; Maitlis & Lawrence, 2007). In her studies of symphony
orchestras, Maitlis (2005) finds that some members are motivated to “ani-
mate” internal discourse over an extended period by producing and circu-
lating information regarding issues of concern. In this respect, members
have the same “sensegiving capacities” as leaders such as the ability to
engage in discourse with actors inside and outside the organization on spe-
cific issues. However, member sensegiving differs from leader sensegiving in
that the former is more administrative and controlled (Maitlis, 2005), and
it is geared toward advancing oneself rather than reorienting organizational
strategies (Maitlis & Lawrence, 2007). Effectively, in contrast to top man-
agement, organizational members have a sense of “bounded responsibil-
ity,” as they focus on their own interests or the interests of the stakeholders
they represent (Maitlis & Lawrence, 2007).
In the case of sustainable investment, sustainability or ESG specialist
managers may be “bound” by an interest in advancing their own expertise
in ESG integration or in representing the movements initiated by institu-
tions such as Eurosif or UN PRI. When top management grants social
legitimacy to promoters who seek to advance an enlightened view, those
promoters excel in their change-agent role (Maitlis & Lawrence, 2007).
This may occur, for example, when a change-agent manager advances his
or her own beliefs when addressing climate change or new technologies to
reduce CO2 emissions (Lewis & Juravle, 2010, p. 492). Field interviews by
Sakuma (2012) show that asset managers who fervently use ESG informa-
tion are motivated to demonstrate the benefits of the ESG analysis and
process in order to take advantage of regulatory agenda. Moreover,
mergers, acquisitions, and spin-offs create a chance to fuse change agents
into a mainstream investment process (Lewis & Juravle, 2010). Indeed,
one ESG team at a leading asset management company provides evidence
of this motivation to demonstrate the ESG “procedures” rather than
376 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

genuinely improve companies’ governance. The following statement by an

ESG specialist illuminates the asset manager’s beliefs in this “administra-
tive” aspect:
Where we think there is a strong relationship between social or environmental issues
and a company’s business prospects, then we see it as an obligation to talk to the com-
pany about that. (Responible-Investor.com, October 1, 2007)6

Shortly, this team has positioned itself directly under the CEO as a result
of spin-off to a new asset management entity. Over time, “sustainability is
pitched highly in his asset management company’s marketing.”7 Multiple
data points provided by ESG information providers enable change agents
to market their products more efficiently, as they modify those products
according to diverse criteria demanded by asset owners. When speaking of
the strength of his company’s sustainable investments, one ESG leader
stated:
First of all, the sustainability screening process at XYZ [name of the asset management
company] is a highly automated process and has the ability to include a very wide range
of sustainability and ethical criteria. Thereby the screening process can easily be
adapted to the client’s ethical perspectives. Secondly, new products are developed fol-
lowing a very cost-effective and streamlined process, as well for open funds as for struc-
tured products. (Professional Wealth Management, Issue 75, November 1, 2009)8

The administrative nature of ESG specialist managers’ responsibilities

was especially evident in the period following the 2008 2010 financial cri-
sis. As top management sided with the core investment team in the crisis,
the specialist teams at several companies had little choice but to leave their
organizations. For example, one UK-based asset management company,
which was home to major protagonists in the sustainable investment indus-
try, replaced its specialist team of six, which managed less than 1% of the
total assets under management, with members of the mainstream team.9
Such a shift in strategy is indicative of disconnect between top manage-
ment’s vision and the sensegiving of ESG specialist managers (Kemna &
van de Loo, 2009; Maitlis & Sonenshein, 2010). Another ESG specialist,
after embedding the internal ESG procedure and building up a team at his
asset management company, left the company to join UN PRI. The
top management of his asset management company described his role as
“setting up the ESG team and integrating ESG criteria into the investment
criteria.”10 Given the limited importance attributed to representing “sus-
tainability” to the organization, sensegiving managers may be motivated
to promote their own interests or the interests of organizations promoting
sustainable investment.
Investor Motivations to Integrate ESG 377

The above interpretation of the bounded responsibility of specialists,

which is developed through the lens of the sensemaking literature, reveals
somewhat counterintuitive motivations. Sustainability-enlightened man-
agers may be driven to demonstrate conformance with the expectation that
they should use ESG information in their investment strategies. However,
despite their good intentions, their attempts to engage in sensegiving by
way of labeling sustainable strategies and creating specialist teams could, in
fact, inhibit organizational sensemaking and sensegiving. This occurs when
sensegivers who are advancing their own or the institutional beliefs disre-
gard competing logics within the organization. If sensegiving managers fail
to build the new vision as a core strategy and a core value of the organiza-
tion, their good intentions are likely to be resisted or dismissed. This, in
turn, impedes successful organizational adaptation (Gioia & Chittipeddi,
1991; Maitlis & Sonenshein, 2010; Wicks, 2002).

SENSEGIVING CAPACITIES AND MOTIVATIONS

TO DEMONSTRATE CONFORMANCE

We now turn to a closer examination of the concept of “sensegiving capaci-

ties” (Maitlis & Lawrence, 2007). The aim here is to define the drivers that
lead asset managers to incorporate externally defined ESG information
into their investment strategies when faced with external pressures to do so.
In this regard, we reconcile the sensemaking literature with the cognitive
and behavioral literature, and with the symbolic management literature
and institutional theory. This approach enables us to look at multilevel
forces that shape the motivations of asset managers (Fox-Wolfgramm,
Boal, & Hunt, 1998; Holland, 2011a) who ultimately adopt the use of ESG
information.

Demonstrating the New Professional Standard: Sustainability Expertise

Sensegiving capacities comprise three competencies: issue expertise,

discursive ability, and the social legitimacy granted by the organization
(Maitlis & Lawrence, 2007). “Issue expertise” refers to deep knowledge
about sustainability issues as well as technical skills for measuring corpo-
rate performance in terms of environmental impact, social responsibility,
and human rights, and other sustainability criteria. Historically, such
378 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

knowledge has been incubated by ESG information providers. These

service providers, together with early adopters of sustainable investment
strategies, created the foundation for a new profession: the sustainability
expert (Louche, 2004). The core competence of sustainability experts is to
measure and analyze sustainability independently of financial metrics. Over
time, these professionals have begun to normalize the use of ESG informa-
tion in the design of sustainable investment strategies.11
However, the skill acquisition of sustainability experts is somewhat
puzzling from the perspective of cognitive and decision-making theory.
Experts develop know-how in order to cognitively and automatically
retrieve task-relevant information (Anderson, 1983; Chi, Glaser, & Farr,
1988; Raab & Johnson, 2007; Shanteau, 1988, 1992; Wagner & Sternberg,
1987). Deliberate decision making, such as decision making based on guide-
lines and ratings, is thought to be not only unpractical in dynamic environ-
ments (Shanteau, 1988, 1992) but also detrimental to performance (Raab &
Johnson, 2007). Counter to the prediction of cognitive and decision-making
theorists, sustainability experts articulate the methods they use to integrate
ESG information into their investment strategies.
Hogarth’s (2005) link between decision makers and their work environ-
ment seems relevant here. When professionals are obliged to justify their
own decisions externally, they tend to seek access to objective tools and
analytical methods (Hogarth, 2005). In the absence of timely and veridical
feedback in the workplace, a reliance on ESG metrics that justify the
difference between sustainable investment and conventional forms of
investment becomes necessary (Hogarth, 2005). Sjöberg (2003) provides
additional evidence of this causal link. When professionals lose control of
the outcome of decisions, such as when they are not responsible for client
assets or the consequences of a divestment, they are motivated to make
decisions on the basis of analytical accuracy. This latter perspective is
consistent with suggestions made by the OECD (2011), Kemna and van
de Loo (2009), and Guyatt (2006) that the lengthening of investment
chains induces managers to distance themselves from the ownership prin-
ciple. In effect, sustainability expert managers’ learning pattern reinforces
the marginalization of ownership responsibility in the investment chain.
Drawing from this cause effect analysis, we posit that asset managers
may be more motivated to demonstrate their commitment to the new pro-
fessional standard of sustainable investment than to behave responsibly.
Box 1 summarizes the mechanism that drives asset managers to demon-
strate commitment.
Investor Motivations to Integrate ESG 379

Box 1. A Mechanism to Drive Asset Managers to Demonstrate

Commitment to the New Professional Standard.

Distancing from
the ownership
principle
Building a new professional
(Kemna and van de
standard
Loo, 2009; OECD,
2011; Guyatt, 2006) (Louche, 2004)

Justifying analytical Normalizing the

accuracy of separation of
sustainability sustainability from
(Hogarth, 2005; financial analyses
Sjöberg, 2003) and processes

Demonstrating the Latest Technique of Shareholder Oversight: ESG

Engagement and Integration

The second competence of sensegiving capacities is “discursive ability.”

From the management-fashion perspective, this refers to the ability to
demonstrate innovative and cutting-edge know-how (Abrahamson &
Fairchild, 1999). Abrahamson and Fairchild (1999) show that knowledge
leaders continuously redefine their own and their followers’ collective
beliefs about the management techniques that are at the forefront of
rational management progress (p. 711). Therefore, early adopters of “sus-
tainable investment” must provide an intense discourse on the latest techni-
ques for shareholder oversight in this case, engagement in and
integration of ESG issues (Abrahamson & Fairchild, 1999). Sustainable
investment leaders rely on business schools and academic institutions to
provide them with the arguments (Bourghelle et al., 2009) that may help
them prove that their visions are unbiased and scientifically sound. For
380 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

example, the lack of evidence indicating that ESG considerations have a

negative impact (Bauer, Derwall, & Otten, 2007; Orlitzky, Schmidt, &
Rynes, 2003) provide Eurosif, UN PRI, and EFFAS member organizations
with rational arguments for the merit of the ESG approach. Academic
findings further empower these organizations to extend discourse to the
public policy sphere in terms of the role of finance in sustainable develop-
ment.12 These organizations have an interest in showing that sustainable
investment is part of a solution to the financial crisis rather than part of
the problem. This naturally leads to collaborative ventures to change cor-
porate behavior. Participants in collaboration seem to believe that they
gain power and legitimacy in relation to investee companies when they can
demonstrate their commitment to shareholder oversight. To date, numer-
ous collaborative engagements have emerged among PRI signatories, as
evidenced by the following statement on the UN PRI website:

There are relatively few investors in the world with the power and legitimacy to influ-
ence individually corporate performance on ESG issues through the size of their own
institutional shareholding alone. The primary objective of the Engagement
Clearinghouse is to provide signatories with a collaborative forum that can transform
one voice into the voice of many.13

However, the desire to gain power and legitimacy results in an unin-

tended dependency on the ESG data providers and sustainable investment
associations for survival (Oliver, 1991, 1997; Pfeffer & Salancik, 1978). The
pooling of resources to pressure and empower companies on ESG issues
pulls participating organizations into an externally defined best-practice
race. In this regard, the symbolic management literature (Fiss & Zajac,
2006; Westphal & Zajac, 1998, 2001) shows how organizations decouple
from real implementation by symbolically adopting an external logic.
Decoupling is a strategy through which leaders cover up members’ failures
to script the change (Westphal & Zajac, 2001). In the face of insecurity, the
need to gain legitimacy in order to exercise power over companies is likely
to underpin such leaders’ decisions (Meyer & Rowan, 1977). From the sym-
bolic management perspective, know-how related to ESG engagement and
integration alone may not induce long-term organizational learning. In fact,
the adoption of such techniques outside the core strategy is prone to suffer
from superstitious learning (Abrahamson & Fairchild, 1999). More pre-
cisely, irrational engagement in innovative oversight techniques tend to con-
fine the organization’s choice but to decouple and to follow the next trend.
On the basis of this conceptual analysis, we posit that asset management
companies may be motivated to demonstrate commitment to shareholder
Investor Motivations to Integrate ESG 381

oversight rather than to behave as responsible owners. Box 2 summarizes

the mechanism that drives organizations to demonstrate commitment.

Advancing Own Social Success Through Engaging in Sustainable Investment

Lastly, external collaborative ventures paradoxically grant sensegiving

managers the third competence: social legitimacy within the organization.
“Social legitimacy” refers to the representative role played by sustainability
experts toward the external audience. As a result of top management’s diffi-
culties in handling the transparency and accountability pressures (Gioia &
Chittipeddi, 1991), new experts join the organization or enlightened
managers build their own teams. They act as the “sustainability face” of the
organization. However, the acquired social status of these experts does not
necessarily match their access to internal resources. In the face of internal
resistance (Kemna & van de Loo, 2009; Maitlis & Sonenshein, 2010),
sustainability experts may strive to upgrade hierarchy in relations to main-
stream managers in terms of functions and remuneration (Guyatt, 2006).

Box 2. A Mechanism to Drive Organizations to Demonstrate

Commitment to Shareholder Oversight.

Decoupling the ESG

engagement from a core
strategy Staying at the forefront of
(Westphaland Zajac, 2001; shareholder oversight
Fiss and Zajac, 2006) (Abrahamson and Fairchild, 1999)

Gaining power and

legitimacy over Improving rational
companies arguments of ESG
(Oliver, 1991; Pfeffer integration and
and Salancik,1978) engagement
382 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

In so doing, sustainability experts may take a risk by attempting to become

an institutional resource of the UN PRI, Eurosif, or other sustainable
investment institutions (Oliver, 1997).
From the perspective of old institutional theory and the resource-based
view (RBV) of the firm, differentiation is key to an organization’s long-
term success. From this perspective, relying on an institutional resource
would lead to a loss of the organization’s distinct competence (Selznick,
1957, 1996) and competitive advantage (Barney, 1991, 2001; Porter &
Kramer, 2006). Selznick (1957) argues that leaders need to remain politi-
cally and culturally isolated in order to build distinct value in the organiza-
tion. For Barney (1991, 2001), the deployment of inimitable and
nontradable firm-specific resources is critical for sustaining competitive
advantage. Therefore, from top management’s point of view, the adoption
of the logic promoted by the sustainable investment institutions not only
contradicts the core strategic argument but can also be a threat. They may
want their core asset managers to consider the external pressures in a man-
ner naturally legitimate to stakeholders (Holt, 2009). However invisible this
process may become, top management may prefer incremental learning
among the core asset managers, who eventually build a distinct risk govern-
ance and return-making culture (Holt, 2009). This gap in expectations
between the top management and ESG specialist managers is likely to deter
the latter from becoming a strategic resource. Subsequently, ESG managers
tend to focus on own social success: becoming the sustainability face of the
organization.
On the basis of this interpretation, we posit that sustainability managers
may be more motivated to advance in the organizational hierarchy and to
improve their public image because they fail to become strategic resources
for their organizations. In other words, as their ESG know-how is unlikely
to support the organization’s distinct competence, these managers may be
driven to focus on their own social success. In a way, ESG managers are
“locked in” a strategy circle until they depart from the organization. Box 3
summarizes the mechanism that drives ESG-adopting asset managers to
focus on their own success, which arises because the organizational leader-
ship sides with the core strategic team.
Fig. 1 illustrates the relationship between motivations to demonstrate
conformance and the asset manager’s behavior. The illustration has three
key elements. First, the organization’s drive to demonstrate commitment to
shareholder oversight and individuals’ drive to show commitment to new
professional standards underpin asset managers’ motivations to demon-
strate conformance. Second, the motivation to demonstrate conformance
is likely to result in the pursuit of self-interests, which fosters the formation
Investor Motivations to Integrate ESG 383

Box 3. A Mechanism to Drive ESG Managers to Focus on their

Own Social Success.

Failing to become part

of the organization’s
distinctive
Becoming the
competence
‘sustainability face’
(Selznick, 1957; Barney, of an organization
1991)

Facing with internal

Seeking to upgrade tensions
hierarchy by becoming (Maitlis and Sonenshein,
institutional resource 2010; Kemna and van de
(Oliver, 1997) Loo, 2009)

A mechanism to drive asset managers Adaptation to

to demonstrate commitment to the responsible
new professional standard ownership
(Box 1) culture

A mechanism to
drive ESG Sensegiving capacities
Motivations to
managers to
demonstrate • Sustainability expertise
focus on their own
conformance • Discursive ability in ESG
social success
(Box 3) • Social legitimacy

A mechanism to drive organizations to Adoption of ESG

demonstrate commitment to information
shareholder oversight without ownership
(Box 2) mindset

Fig. 1. Motivations to Demonstrate Conformance and Likely Behavioral Outcomes.

384 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

of sensegiving capacities. Third, the formation and development of sense-

giving capacities ultimately induces a superficial behavior: the adoption of
a focus on ESG information without an ownership mindset. More
precisely, asset managers who are driven to show conformance are unlikely
to behave like owners because they have a limited interest in reorienting
their organization’s culture or the power to do so.
Given the conformance motivations of ESG-adopting managers, we
posit that pressuring asset managers to adopt ESG information in their
investment strategies may not effectuate a real behavioral change that is,
there may be no shift toward achieving better returns by empowering com-
panies to focus on long-term sustainability. On the contrary, such pressures
may result in a strategy of disguise. Namely, asset managers conform to
legitimate sustainable investment strategies that allow them to hide their
lack of interest in changing their own behaviors and the behaviors of their
corporations.

DO CONFORMANCE MOTIVATIONS RESULT IN

LASTING CORPORATE CHANGE?

Thus far, we have tried to show the counterintuitive learning process

experienced by asset managers who are at the forefront of ESG-based
investment strategies. Promoters of sustainable investment strategies,
together with scholars in sustainable investment research, have established
the dominant assumption: the standardized disclosure of ESG information
and its use by investors plays a central role in changing corporate beha-
viors. The insight gained from our conceptual analysis reveals that asset
managers who adopt ESG information are more likely to be motivated to
demonstrate conformance than to act as long-term owners. In the follow-
ing, therefore, we develop three propositions to clarify our findings.
Asset managers with ESG know-how are change agents (Lewis &
Juravle, 2010) who emerge when asset management companies find them-
selves in a disruptive state (Weick, 1988). When faced with public pressure
for transparency and accountability (Holland, 2011a), asset management
companies seek to regain legitimacy as sustainable and responsible
investors, in line with social expectations (Meyer & Rowan, 1977). This
situation creates an opportunity for change agents to advance inside and
outside their organizations as sustainability experts (Lewis & Juravle, 2010;
Maitlis & Lawrence, 2007). They create specialist teams to represent the
Investor Motivations to Integrate ESG 385

sustainability face of the organization, while the core investment team’s

functions generally remain largely unchanged (Guyatt, 2006). Core main-
stream managers maintain a significant amount of power (Guyatt, 2006),
whereas sustainability managers gain legitimacy from ESG information
providers and ESG network institutions (Louche, 2004). Over time, sus-
tainability managers develop an expertise in independent sustainability
analysis and excel in their catalyst role of making finance suitable for sus-
tainable development (Louche, 2004).
As asset managers succeed in their role of redefining their own and ESG
followers’ collective beliefs about the latest developments in shareholder
oversight (Abrahamson & Fairchild, 1999), they find themselves locked
into the logic of the sustainable investment institution (Oliver, 1997;
Pfeffer & Salancik, 1978). This occurs because they are less motivated to
reorient the core strategy of their organizations than to influence others to
adopt their own enlightened view (Gioia & Chittipeddi 1991; Maitlis &
Lawrence, 2007). However, institutionally created knowledge is not a firm-
specific strategic resource (Barney, 1991). This situation inevitably creates
tensions between the core organizational teams and the specialist team
(Maitlis & Lawrence, 2007). As sustainability experts seek to play a more
rewarding role within the new institutional field of sustainable investment,
they demonstratively stress their conformity with public expectations.
Changing own behaviors becomes a secondary consideration, and ensuring
long-term corporate behaviors is even lower on the priority list. Given the
bounded sense of ownership responsibility (Maitlis & Lawrence, 2007),
these managers are unlikely, in the long term, to ensure that investee
companies remain sustainable and competitive. This encapsulates our first
proposition:
Proposition 1. When asset managers are motivated to demonstrate
conformance to the new sustainability professional standard, they are
unlikely to make a lasting change in corporate behavior.
The suggestion that corporate behaviors can be changed by way of ESG
adoption is based on the assumption that companies disclose consistently
high-quality ESG information. The information providers on which ESG-
adopting asset managers depend are, in turn, dependent on the willingness
of companies to disclose relevant information. Therefore, institutionally
defined sustainability strategies could not be realized without publically
available reliable ESG data. Given this chain of dependency, active partici-
pants in the sustainable investment field are as vulnerable to a sudden
market disturbance as conventional investors. The recent financial crisis
386 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

provided evidence of this vulnerability sustainable investment funds

offered no protection from the market downturn (Amenc & Le Sourd,
2010).14
To the extent that asset managers feel obliged to legitimize their deci-
sions to mainstream colleagues within and outside their own organizations,
this dependency on ESG data continues (Hogarth, 2005). Asset managers
are more likely to focus on demonstrative efforts to create a new ESG
convention (Bourghelle et al., 2009; Dumas & Louche, 2011; Guyatt, 2005;
Jemel-Fornetty et al., 2011) than to renew a mental map that would inte-
grate sustainability with financial issues in everyday tasks (Anderson, 1983;
Shanteau, 1988, 1992). The career success of sustainability expert managers
critically depends on the former, as invisible, automated problem solving
would provide no benefit to their organizations.
This situation creates a paradox in investor learning. In the asset man-
agement industry, where timely and practical decisions are required, asset
managers need to solve problems automatically (Anderson, 1983), to make
quick adjustments (Shanteau, 1988, 1992), and to continually perform well
(Holland, 2006). They may become dysfunctional and perform subopti-
mally when forced to articulate their decision making (Raab & Johnson,
2007). As our analysis shows, the dependency on the market for ESG
information can impair asset managers’ abilities to maintain returns in a
turbulent market. Our second proposition is therefore the following:
Proposition 2. When asset managers are motivated to demonstrate
sustainability know-how separately from financial know-how, they are
unlikely to sustain consistent returns in the event of data inconsistency.
Separating sustainability from finance is also apparent in the organiza-
tional hierarchy. As shown by Guyatt (2006), internal conventions rein-
force the subordination of sustainability experts to their mainstream
colleagues. This internal culture of segregation and subordination (Guyatt,
2006) leads to a limited sense of responsibility among sustainability experts,
as they take on a role as providers of functionality within the organization
rather than as asset management professionals (Sveiby, 1997). Some are
more successful than others in advancing their positions, such as those who
succeed in placing their teams directly under the CEO (Lewis & Juravle,
2010). However, the functional separation of sustainability could mean
that the organization’s sustainable investment strategies are unlikely to be
distinct. Organizations develop a distinct competence when their top
management successfully build a firm-specific sustainability value into
organizational life (Selznick, 1957).
Investor Motivations to Integrate ESG 387

Moreover, dependency on sustainable investment institutions facilitates

know-how diffusion to competitors. The use of imitable and tradable
know-how is unlikely to result in a long-term competitive advantage
(Barney, 1991, 2001). Indeed, the sustainable investment market has low
barriers to entry, as anyone who pays for ESG information services or
membership in trade associations, such as Eurosif and UN PRI, can enter.
Unless organizations “move away from an emphasis on image to an empha-
sis on substance,” sustainable investment is unlikely to become a competi-
tive value driver (Porter & Kramer, 2006, p. 13). This may mean that
investor integration of ESG information and engagement with companies
on ESG issues will remain a short-term symbolic agenda. As the emerging
ESG convention may not induce distinctive sustainable investment practices
on the part of asset management companies, our third proposition is:
Proposition 3. When sustainability concerns are delegated to a separate
team and measured in external metrics, the organizational capacity to
integrate sustainability and financial return concerns will become less
distinctive.

CONCLUSION

This chapter explores the motivations of asset managers to integrate

externally defined ESG information into their investment strategies when
faced with pressures for transparency, sustainability, and responsibility. We
draw from the sensemaking literature to illuminate a counterintuitive
motivation of asset managers: the demonstration of conformance. Asset
managers may be motivated to demonstrate conformity with institutional
requirements by using a justifiable and legitimate method: the explicit
integration of ESG issues into investment processes. However, this confor-
mance motivation tends to be inherently short term and symbolic. If asset
managers are only concerned with their own image, the sustainable invest-
ment movement may be nothing more than a short-term agenda item.
Despite the extraordinary market growth and the emergence of specific
strategies, sustainable investment may not lead to a substantive change
in corporate behavior. A long-term commitment on the part of asset
managers is required to ensure that companies behave sustainably yet
competitively. Such a long-term commitment seems possible only when the
integration of sustainability and financial issues becomes a distinct and
inimitable core strategy of organizations.
388 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

Our findings have several implications for policy. Despite the good
intentions of the European Commission to build investors’ capacities for
changing corporate behaviors, exerting regulatory pressure to disclose ESG
considerations may have several undesired outcomes. Given their motiva-
tion to conform, asset managers may resort to symbolic compliance with
the legitimated, and thus institutionally dependent, methods. Moreover,
policy makers’ interest in prescribing the ESG language may inadvertently
deprive leaders and asset managers of a learning opportunity during a dis-
ruptive stage of organizational life. When this occurs, the well-intended
policy may push them toward artificial learning (Abrahamson & Fairchild,
1999). As the recent Kay Review predicts, policy makers may need to shift
their focus away from the current preoccupation with form to the beha-
viors themselves.15 This may imply that the current regulatory agenda for
ESG criteria reporting and the labeling of sustainable investment for inves-
tor protection need some rethinking.16
Given the scarcity of motivation research in the field of sustainable
investment, we call for in-depth empirical studies grounded on asset man-
ager’s experience. In our view, such investigations are necessary and urgent.
We are still in the midst of an extended financial crisis in which policy
makers, asset owners, retail investors, companies, and civil society as a
whole are grappling with the paradoxes of investors’ behavior. The scale
and the depth of the problem call for a profound and thorough examina-
tion of the “invisible” motivational factors discussed in this chapter. This
leads us to a conclusion that is similar to those of John Holland (2011b):
we must rely on a research method that allows practitioners’ interpretations
to guide the building of theory.

NOTES
1. According to the Financial Times (September 19, 2012), US stock ownership
is concentrated in the hands of a few large fund managers. However, these man-
agers rarely challenge companies in the proxy process because “governance activism
attracts attention and controversy and has no marketing value.”
2. The United Kingdom’s Financial Services Authority finds that fund managers
do not trade in customers’ best interests as “they regularly spen[d] millions of pounds
of their customers’ money buying research and execution services from brokers”
without verifying their eligibility to do so (Financial Times, November 9, 2012).
3. Revelations in 1990s included Shell’s involvement in Nigeria, which led to the
execution of a human rights activist, and PespsiCo’s provision of support to
Burma’s military government.
Investor Motivations to Integrate ESG 389

4. The campaign resulted in the enactment of the Pension Disclosure Law in

2000.
5. The European Commission issued a Green Paper on corporate governance in
financial institutions in June 2010, which was followed by another Green Paper on
the EU corporate governance framework, which was targeted at listed companies,
in April 2011. The Commission is expected to issue an EU Action Plan on
Company Law and Corporate Governance in December 2012.
6. The article can be accessed at http://www.responsible-investor.com/home/
article/abps_total_responsible_investment_strategy/
7. Taken from Responsible-investor.com, May 7, 2009. The article can be
accessed at http://www.responsible-investor.com/home/article/apg_china/
8. The article can be accessed at http://www.pwmnet.com/Archive/Niche-
products-with-diversification-benefits
9. Responsible-investors. com, November 25, 2011. In January 2012, another
leading sustainable investment house in the United Kingdom closed its flagship 16
member specialist team in order to “to ‘refocus’ its environmental, social and gov-
ernance (ESG) activities” on mainstream activities, according to Responsible-inves-
tors.com, January 30, 2012.
10. Investment & Pension Europe, March 30, 2011.
11. Eurosif (2010) reports that external providers, including ESG research provi-
ders, index providers, and sell-side research (brokers), remain the most important
sources of information for asset managers active in sustainable investment.
12. UN PRI is recruiting a public policy director at the time of writing. Eurosif’s
Secretariat explained that it is strengthening its EU lobbying efforts during its
annual member meeting on September 22, 2011.
13. Accessed on November 20, 2012. See http://www.unpri.org/collaborations/
14. To the best of our knowledge, few studies account for the impact of financial
crisis on sustainable investment strategies. Amenc and Le Sourd (2010) use the
Fama-French three-factor model to analyze French SRI funds data over an eight-
year period (2002 2009). They find that these funds increased the proportion of
extremely high-risk investments during January 2007 and December 2009, resulting
in mostly negative alpha, although the finding was statistically insignificant.
15. Professor John Kay calls for a philosophical shift among policy makers in
The Kay Review of UK Equity Markets and Long-term Decision Making, which
was commission by the UK Ministry of Business, Innovation and Skills, and was
published in July 2012. In a seminar organized by Finance Watch on October 17,
2012, in Brussels, Professor Kay reiterated that regulators must shift their focus
from structures and disclosure to behaviors.
16. In the European Commission proposal for the regulation of key information
documents for investment products (July 2012), the Commission recognizes
“responsible investment” as a new investment category.

REFERENCES

Abrahamson, E., & Fairchild, F. (1999). Management fashion: Lifestyles, triggers, and collec-
tive learning processes. Administrative Science Quarterly, 44(4), 708 740.
390 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

Amaeshi, K., & Grayson, D. (2008). The challenges of mainstreaming environmental, social and
governance (ESG) issues in investment decisions A mini-survey of practitioners’ reports
[A contribution to the Valuing Business Project]. Retrieved from http://investorvalue.org/
docs/TheChallengesOfMainstreamingEnvironmentalSocialAndFinancialPerformance.pdf
Amenc, N., & Le Sourd, V. (2010). The performance of socially responsible investment and
sustainable development in France: An update after the financial crisis. Research paper by
EDHEC-Risk Institute, September 2010.
Anderson, J. R. (1983). The architecture of cognition. Cambridge, MA: Harvard University
Press.
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of
Management, 17, 99 120.
Barney, J. B. (2001). Is the resource-based “view” a useful perspective for strategic manage-
ment research? Yes. Academy of Management Review, 26, 41 56.
Basu, K., & Palazzo, G. (2008). Corporate social responsibility: A process model of sensemak-
ing. Academy of Management Review, 33(1), 122 136.
Bauer, R., Derwall, J., & Otten, R. (2007). The ethical mutual fund performance debate:
New evidence from Canada. Journal of Business Ethics, 70(2), 111 124.
Bourghelle, D., Jemel, H., & Louche, C. (2009). The integration of ESG information into invest-
ment processes: Toward an emerging collective belief? Working Paper as part of EABIS
project.
BSR. (2006, February). Business brief: Intangibles and CSR. Business for Social Responsibility.
Retrieved from http://www.bsr.org/reports/BSR_AW_Intangibles-CSR.pdf
BSR. (2009, September). ESG in the mainstream: The role for companies and investors in
environmental, social, and governance integration. Business for Social Responsibility.
Retrieved from http://www.bsr.org/reports/BSR%20ESG%20Integration%20Report%20_
Sept%202009_final.pdf
Chi, M. T., Glaser, R., & Farr, M. J. (1988). The nature of expertise. New York, NY:
Psychology Press.
Clulow, V., Gerstman, J., & Barry, C. (2003). The resource-based view and sustainable compe-
titive advantage: A case of financial services firm. Journal of European Industrial Training,
25(5), 220 232.
Corno, F., Fossati, S., & Simioni, F. (2005). The role of ethical advisors in promoting socially
responsible investments. International Journal of Accounting, Auditing and Performance
Evaluation, 2, 4.
DiMaggio, P., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and
collective rationality in organizational fields. American Sociological Review, 48, 147 160.
Dumas, C., & Louche, C. (2011). Mimetic processes in responsible investment mainstreaming.
Proceedings of the Twenty-Second Annual Meeting, 22, 234 245.
EABIS. (2009). The challenges of mainstreaming environmental, social and governance (ESG)
issue in investment decision. Evidence from practitioners’ reports. Working Paper.
Eccles, R. G., Krzus, M. P., & Serafeim, G. (2011). Market interest in nonfinancial information.
Working Paper No. 12-018. Harvard Business School, September 22, 2011, draft.
European Commission. (2011). Communication from the commission to the European
Parliament, the Council, The European Economic and Social Committee and The Committee
of the Regions, a renewed EU strategy 2011-14 for corporate social responsibility, Brussels,
25.10.2011, COM(2011), 681 final. Retrieved from http://eur-lex.europa.eu/LexUriServ/
LexUriServ.do?uri=COM:2011:0681:FIN:EN:PDF
Investor Motivations to Integrate ESG 391

Eurosif. (2010). The European SRI Study 2010. Retrieved from http://www.eurosif.org/
images/stories/pdf/Research/Eurosif_2010_SRI_Study.pdf
Eurosif. (2012). The European SRI Study 2012. Retrieved from http://eurosif.org/images/
stories/pdf/1/eurosif%20sri%20study_low-res%20v1.1.pdf
Fahy, J. (2000). The resource-based view of the firm: Some stumbling-blocks on the road to
understanding sustainable competitive advantage. Journal of European Industrial Training,
24(2/3/4), 94 104.
Fama, E. F. (1998). Market efficiency, long-term returns, and behavioral finance. Journal of
Financial Economics, 49(3), 283 306.
Fiss, P. C., & Zajac, E. J. (2006). The symbolic management of strategic change: Sensegiving
via framing and decoupling. Academy of Management Journal, 49(6), 1173 1193.
Fox-Wolfgramm, S. J., Boal, K. B., & Hunt, J. G. (Jerry) (1998). Organizational adaptation to
institutional change: A comparative study of first-order change in prospector and defender
banks. Administrative Science Quarterly, 43, 87 126.
Gioia, D. A., & Chittipeddi, K. (1991). Sensemaking and sensegiving in strategic change initia-
tion. Strategic Management Journal, 12, 433 448.
Gray, J. (2012). Misadventures of an irresponsible investor. Rotman International Journal of
Pension Management, 5(Fall), 2.
Grinblatt, M., Titman, S., & Wermers, R. (1995). Momentum investment strategies, portfolio
performance, and herding: A study of mutual fund behavior. The American Economic
Review, 85(5), 1088 1105.
Guyatt, D. J. (2005). Meeting objectives and resisting conventions: A focus on institutional
investors and long-term responsible investing. Corporate Governance, 5(3), 139 150.
Guyatt, D. J. (2006). Identifying and overcoming behavioural impediments to long term responsi-
ble investment: A focus on UK institutional investors. A thesis submitted for the degree of
Doctor of Philosophy, University of Bath, Department of Psychology, July 2006.
Hirshleifer, D. (2001). Investor psychology and asset pricing. Journal of Finance, 56(4),
1533 1597.
Hogarth, R.M. (2005). Deciding analytically or trusting your intuition? The advantages and
disadvantages of analytic and intuitive thought. In T. Betsch & S. Haberstroh (Eds.), The
routines of decision making (pp. 67 82). Mahwah, NJ: Erlbaum.
Holland, J. (2006). Fund management, intellectual capital, intangibles and private disclosure.
Managerial Finance, 32, 277 316.
Holland, J. (2011a). A conceptual framework for changes in fund management and account-
ability relative to ESG issues. Journal of Sustainable Finance and Investment, 1, 159 177.
Holland, J. (2011b). Behaviour and investment actions within fund managers and their markets
Developing and analysing a grounded theory of fund management. CEB Working Paper
No. 11/057, December 4th, 2011. Université Libre de Bruxelles Solvay Brussels School of
Economics and Management Centre Emile Bernheim.
Holt, M. K. (2009). An exploration into sensemaking and sensegiving: A stakeholder model
approach. Academy of Management Organizational Theory Track, Best Student Paper
Award Winner, Union University Jackson.
Jaworski, W. (2007). Use of extra-financial information by researchaAnalysts and investment
managers. European Centre for Corporate Engagement, March.
Jemel-Fornetty, H., Louche, C., & Bourghelle, D. (2011). Changing the dominant convention:
The role of emerging initiatives in mainstreaming ESG. In: W. Sun, C. Louche, R. Pérez
(Eds.), Finance and sustainability: Towards a new paradigm? A post-crisis agenda (Vol. 2,
392 KYOKO SAKUMA-KECK AND MANUEL HENSMANS

pp. 85 117). Critical Studies on Corporate Responsibility, Governance and Sustainability.

Bingley, UK: Emerald Group Publishing Limited.
Juravle, C., & Lewis, A. (2008). Identifying impediments to SRI in Europe: A review of
the practitioner and academic literature. Business Ethics: A European Review, 17(3),
285 310.
Kemna, A. G. Z., & van de Loo, E. L. H. M. (2009). Role of institutional investors in relation
to management boards and supervisory directors: A triangular survey. October 2009.
Lewis, A., & Juravle, C. (2010). Morals, markets and sustainable investment: A qualitative
study of ‘Champions’. Journal of Business Ethics, 93, 483 494.
Louche, C. (2004). Ethical investment Processes and mechanism of institutionalisation in the
Netherlands, 1990 2002. Ph.D. dissertation, Erasmus University Rotterdam.
Maitlis, S. (2005). The social process of organizational sensemaking. Academy of Management
Journal, 48(1), 21 49.
Maitlis, S., & Lawrence, T. B. (2007). Triggers and enablers of sensegiving in organizations.
Academy of Management Journal, 50(1), 57 84.
Maitlis, S., & Sonenshein, S. (2010). Sensemaking in Crisis and change: Inspiration and
Insights from Weick (1988). Journal of Management Studies, 47(3), 551 580.
McKinsey. (2009). Valuing corporate social responsibility. McKinsey Global Survey Results.
Meyer, J., & Rowan, B. (1977). Institutionalized organizations: Formal structure as Myth and
ceremony. American Journal of Sociology, 83(2), 340 363.
OECD. (2011). The role of institutional investors in promoting good corporate governance.
Corporate governance. OECD Publishing. doi:doi: 10.1787/9789264128750-en
Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management
Review, 16(1), 145 179.
Oliver, C. (1997). Sustainable competitive advantage: Combining institutional and resource-
based views. Strategic Management Journal, 18(9), 697 713.
Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial perfor-
mance: A meta-analysis. Organization Studies, 24(3), 403 441.
Pfeffer, J., & Salancik, R. (1978). The external control of organizations. New York, NY:
Harper & Row.
Porter M. E., & Kramer M. R. (2006). Strategy & society The link between competitive
advantage and corporate social responsibility. Harvard Business Review, December.
Professional Wealth Management. (2009). Niche products with diversification benefits, by
PWM Editor, November 1.
Raab, M., & Johnson, J. G. (2007). Implicit learning as a means to intuitive decision making
in sports. In: H. Plessner, C. Betsch, & T. Betsch (Eds.), Intuition in Judgment and decision
making (pp. 119 134). New York, NY: Lawrence Erlbaum Associates.
Responsible-investor.com. (2007). ABP’s total responsible investment strategy, by Hugh
Wheelan, October 1.
Sakuma, K. (2012). Conformance and non conformance of asset managers to the environment,
social and governance pressures Sensemaking capacities and the use of externally defined
information. An unpublished thesis submitted for a Ph.D. in Economics and Management,
Universite Libre de Bruxelles, Solvay Brussels School of Economics and Management, June
18, 2012.
Sandberg, J., & Alvesson, M. (2011). Ways of constructing research questions: gap-spotting or
problematization? Organization, 18(1), 23 44.
Scharfstein, D. S., & Stein, J. (1990). Herd behavior and investment. The American Economic
Review, 80(3), 465 479.
Investor Motivations to Integrate ESG 393

Selznick, P. (1957). Leadership in administration a sociological interpretation. Los Angeles,

CA: Harper & Row, Publishers, Inc. California Paperback edition 1984.
Selznick, P. (1996). Institutionalism “old” and “new”. Administrative Science Quarterly,
Vol. 41(2), 40th Anniversary Issue, 270 277.
Shanteau, J. (1988). Psychological characteristics and strategies of expert decision makers.
Acta Psychologica, 68, 203 215.
Shanteau, J. (1992). Competence in experts: The role of task characteristics. Organizational
Behavior and Human Decision Processes, 53, 252 266.
Sias, R. W. (2004). Institutional herding. The Review of Financial Studies, 17(1), 165 206.
Sjöberg, L. (2003). Intuitive vs. analytical decision making: which is preferred? Scandinavian
Journal of Management, 19, 17 29.
Sullivan, R., & Mackenzie, C. (2006). Responsible investment. Sheffield: Greenleaf Publishing.
Sun, W., Louche, C., & Pérez, R. (2011). Finance and sustainability: Exploring the reality we
are making. In: W. Sun, C. Louche, & R. Pérez (Eds.), Finance and sustainability: Towards
a new paradigm? A post-crisis agenda (Vol. 2, pp. 3 15). Critical Studies on Corporate
Responsibility, Governance and Sustainability. Bingley, UK: Emerald Group Publishing
Limited.
Sveiby, K.-E. (1997). The new organizational wealth, managing & measuring knowledge-based
assets. San Francisco, CA: Berrett-Koehler Publishers, Inc.
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases.
Science. New Series, 185, 4157, 1124 1131.
Wagner, R. K., & Sternberg, R. J. (1987). Tacit knowledge in managerial success. Journal of
Business Psychology, 1(4), Summer, 301 312.
Weick, K. E. (1988). Enacted Sensemaking in crisis situations. Journal of Management Studies,
25(4), 305 317.
Weick, K. E. (1993). The collapse of sensemaking in organizations: The Mann Gulch disaster.
Administrative Science Quarterly, 38(4), 628 652.
Weick, K. E. (1995). Sensemaking in organizations. Thousand Oaks, CA: Sage Publications, Inc.
Weick, K. E., Sutcliffe, K. M., & Obstfeld, D. (2005). Organizing and the process of sensemak-
ing. Organization Science, 16, 409 421.
Westphal, J. D., & Zajac, E. J. (2001). Decoupling policy from practice: The case of stock
repurchase programs. Science Quarterly, 46, 202 228.
Wicks, D. (2002). Institutionalized mindsets of invulnerability: Differentiated institutional
fields and the antecedents of organizational crisis. Organization Studies, 22, 659 692.