The article discusses whether investors have a financial interest in weighing in the social responsibility of companies. There may be two reasons why investors should base investment decisions on social and environmental factors: ethical preferences and common sense risk management. As regards risk management, increased focus on the social responsibility of the company means that also mainstream investors may weigh in non-financial risks solely for the sake of profits, but only to the extent that the responsibility affects the value creation within the company, conclude Plesner and Jørgensen.
Finally, the article lists the information on the social responsibility of companies which is available. Evaluating a company on the basis of this information is a complicated task as no generally accepted standards exist for indices, reporting, performance or government regulation. But perhaps investors have an interest in speeding up this process by pushing for better reporting practices.
Read more about ‘Reporting for duty: Managing non-financial risks’ in Focus no. 95 at www.cse.dk. Questions to the authors may be sent to the e-mail address info@cse.dk until 10 December 2004.
