Implementing Corporate Sustainability Information in Socially Responsible Investing: A Systematic Review of Empirical Research

Executive Abstract

This study provides a precise understanding of how corporate sustainability information can be used in socially responsible investing (SRI) and identifies avenues for future research. We systemically reviewed 67 SRI studies that involved the use of sustainability information published in quality academic journals. The review was conducted from two angles: (1) the sources of sustainability information, and (2) how the information is used in SRI. We summarise the relevant literature and provide suggestions for future research. Our findings present valuable information to investors intending to engage in SRI. Additionally, our findings are useful for researchers considering new and promising avenues for future research.

Purpose

This study provides a precise understanding of how corporate sustainability information is used in socially responsible investing (SRI). The study is motivated by the lack of a recognised body of knowledge on this issue. We therefore collate and review relevant studies (67 studies) to provide guidance to investors interested in SRI and identify a research agenda for academics desiring to contribute to this area.

Design/methodology/approach

We conduct a systemic literature review employing recognised key words and searching the Web of Science. HistCite is utilized to ensure important cited studies are not missed from the collection. The review was conducted from two perspectives: (1) sources of sustainability information, and (2) how the information is used in SRI.

Findings

The review identifies five major sources of sustainability information, including corporate reports, ESG ratings, industry affiliation, news, and private communication with firms. These sources of information play different roles in the cross section of SRI strategies (i.e., negative and positive screening, active ownership, and integration). We provide guidance on how to use this information in SRI and provide recommendations for future research on how analysts interact with the information, how different informational characteristics impact implementation, ways to improve data quality, improvements to analysis methods, and where data use needs to be extended into new strategies.

Originality/value

Our review contributes to the SRI literature by inventorying studies of an important, yet omitted aspect, namely, sustainability information. Our work also enriches the literature on corporate sustainability information by investigating how this information can be used for a specific purpose, namely, SRI. Given the increasing interest in SRI, our review will provide much needed guidance for a range of practitioners, including investors and regulators.