Facilitators and Impediments for Socially Responsible Investment: A Study of Hong Kong

Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment
* Correspondence to: Emma Sjöström, Stockholm School of Economics, SuRe: Sustainability Research Group, PO Box 6501, 113 83 Stockholm,
Sweden. E-mail: emma.sjostrom@hhs.se
Corporate Social Responsibility and Environmental Management
Corp. Soc. Responsib. Environ. Mgmt. 16, 278–288 (2009)
Published online 27 July 2009 in Wiley InterScience
(www.interscience.wiley.com) DOI: 10.1002/csr.210
Facilitators and Impediments for Socially
Responsible Investment: A Study of Hong Kong
Emma Sjöström1* and Richard Welford2
1 Stockholm School of Economics, Sweden
2 Kadoorie Institute, University of Hong Kong
ABSTRACT
Through the practice of socially responsible investment (SRI), shareholders are involved in
infl uencing corporations with regard to their social and environmental responsibilities. This
paper focuses on SRI in one of the world’s most prominent fi nancial centers, Hong Kong.
It explores why the role of SRI as a way of infl uencing corporate social responsibility in
Hong Kong is limited. The study fi nds that many of the aspects that have facilitated SRI in
North America and Europe are not in place in Hong Kong, and gives examples of such
factors. It also suggests that the institutional logic that dominates Hong Kong’s corporate
and fi nancial sectors has not been receptive to the logic that underlies environmental
protection and social justice, and that this is an impediment to SRI to gain a foothold in
Hong Kong and the Asian region more generally. Copyright © 2009 John Wiley & Sons,
Ltd and ERP Environment.
Received 26 November 2007; revised 19 December 2008; accepted 13 February 2009
Keywords: Asia; CSR; Hong Kong; SRI
Introduction
CORPORATE SOCIAL RESPONSIBILITY (CSR) HAS BECOME A STRATEGIC COMPONENT FOR MANY MULTINATIONAL
corporations (MNCs) today, and is increasingly attended to by the literature on global business (Welford,
1997; Zadek, 2001; Porter and Kramer, 2006). CSR broadly means that a company addresses society’s
expectations on environmental and social dimensions of their operations (such as pollution, energy
consumption, labor conditions, and human rights) and balances the claims of key stakeholders.
Shared ideas about what CSR entails are to some extent formed through corporate interaction with fi nancial
actors, for example through shareholders’ efforts to infl uence corporate behavior in this area (O’Rourke, 2003;
Sparkes and Cowton, 2004; Hills and Welford, 2006).
Activities on the capital market that aim toward supporting or fostering CSR fall under the umbrella term
‘socially responsible investment’ (SRI). SRI entails that investors complement fi nancial analysis with environmental
and social criteria in order to evaluate companies for possible inclusion in an investment portfolio. SRI can
also involve engagement activities in order to infl uence corporate behavior, for example through dialogue with
corporate management, or through proposing and voting on shareholder resolutions at annual general meetings
Facilitators and Impediments for SRI in Hong Kong 279
Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 16, 278–288 (2009)
DOI: 10.1002/csr
(AGMs). Sometimes NGOs (non-governmental organizations) such as environmental or human rights groups
form a coalition with investors to pass a joint shareholder resolution.
While investors may be attracted to SRI as a way to align a portfolio with certain ethical values, investors may
also see it as a way to manage risk, or as a way to achieve higher returns (Schueth, 2003; Beal et al., 2005; SIF,
2006). To infl uence corporate behavior with regard to CSR may serve all of these interests.
Since the 1990s, the number of SRI investment funds and indices as well as SRI-oriented shareholder resolutions
has increased signifi cantly, particularly in Europe and North America (ISS, 2006; SIF, 2006; Avanzi SRI
Research, 2007). In Asia, there are comparably less investments with an SRI approach, with Australia and Japan
as exceptions (Asria, 2003, 2008). This may perhaps explain why there is limited academic research on SRI in
Asia. Examples of previous studies include research on the development of SRI in Japan (Kawamura, 2002); what
Japan can learn from the SRI experience in UK (Solomon et al., 2004); corporate environmental reporting to the
fi nancial sector in Hong Kong (Chan and Welford, 2005); the performance of Australian ethical funds (Bauer
et al., 2006); and risk and return patterns of SRI indices for Japanese pension plans (Jin et al., 2006).
This paper adds to research on SRI in Asia by addressing one of the region’s most prominent fi nancial centers,
namely Hong Kong. The Hong Kong stock exchange is the third largest in Asia and eighth largest in the world,
by market capitalization (HKTDC, 2008). Consequently, there is a potential to utilize this large amount of invested
capital in order to infl uence corporate norms and behavior; for example, through the voting rights and the opportunities
for a dialogue with the Board that share ownership entails.
Furthermore, encouraging CSR (through the fi nancial market or in other ways) is highly relevant in this region,
which faces extensive environmental, labor standard and human rights challenges (Welford and Frost, 2006).
Shareholder infl uence through SRI may in other words have an important role to play in fostering increased
CSR in the Asian region.
Yet, the phenomenon of SRI which is widespread in many other developed fi nancial markets has not gained a
foothold in Hong Kong. Two domestic SRI funds were available in Hong Kong at the time data were collected
(in 2006). This may be compared with 80 such funds in the UK, or 70 in Sweden (Folksam, 2006; Avanzi SRI
Research, 2007). Further, shareholder activism as a way to infl uence corporations is not common in Hong Kong,
except for a few individuals who are vocal in pursuing corporate governance issues (Asria, 2003).
The purpose of this paper is therefore to analyze why the role of the fi nancial market in Hong Kong in infl uencing
corporate social responsibility is so limited today. We will do this by fi rst identifying facilitating factors for SRI
in general, based on trends in countries where SRI has a comparably stronger foothold (which is mainly in Western
markets), and subsequently analyzing how these factors relate to Hong Kong. By facilitators we mean factors that
have helped and stimulated the emergence and growth of SRI.
Method
In order to identify facilitators for SRI, we have drawn on previous literature on this topic. There is, however,
limited academic research on this issue, and we are therefore also drawing on empirical evidence.
For the Hong Kong context, we collected primary data through semi-structured interviews. This method was
chosen because it allows for complex data, since respondents have the opportunity to explain matters in detail and
to bring up aspects that they fi nd most relevant and appropriate. This qualitative method was deemed appropriate
since our study is of an exploratory nature.
Twelve semi-structured interviews were conducted in 2006. Seven respondents were Investor Relations Offi cers
for seven different corporations listed on the Hong Kong stock exchange. Investor Relations Offi cers function as
a ‘window’ between the company and the fi nancial market (Hockerts and Moir, 2004), hence their relevance to
this study. Access to corporate respondents proved diffi cult to obtain, and while we would have liked to include
more respondents in the study, we feel that the seven interviews provided us with a satisfactory picture of the
studied phenomenon.
Additional respondents included: a senior manager at Hong Kong’s public pension scheme, the Mandatory
Provident Fund (MPF); a fi nancial consultant involved in setting up the MPF; Director of a special interest
280 E. Sjöström and R. Welford
Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 16, 278–288 (2009)
DOI: 10.1002/csr
organization examining corporate governance in Asia; Chief Investment Offi cer at an SRI investment fund in
Hong Kong; and a senior research analyst at an Australian SRI research organization that also evaluates Hong
Kong-listed companies. We selected these respondents as a way to access a mix of experts on the fi nancial market
in Hong Kong and how it relates to SRI.
Results
In this section we present what our review of previous research as well as empirical evidence have revealed as
facilitators for SRI in general. This is followed by the results of our interview study of facilitating factors in the
Hong Kong specifi c context.
Facilitators for Socially Responsible Investment
From literature on SRI, a number of factors emerge as particularly infl uential for the establishment or growth of
SRI.
First, a number of studies emphasize the active participation of pension funds in SRI-oriented investments
(Friedman and Miles, 2001; Clark and Hebb, 2004; Amalric, 2006). This has resulted in growth of the SRI market,
given the large pools of assets that pension funds represent. In the USA, pension funds constitute the largest
segment of institutional SRI investors, and are also some of the most active fi lers of shareholder resolutions (SIF,
2006). In the UK, 59% of the largest pension funds are using an SRI approach (UKSIF, 2000). Overall, pension
funds tend to account for a large part of all investment assets in developed countries. This implies that if pension
funds adopt an SRI approach, SRI will represent a comparably large part of total invested assets. Pension funds
may be motivated to invest with an SRI approach due to their long-term investment perspectives and subsequent
interest in the continuous well-being of the economy (Clark and Hebb, 2004; Amalric, 2006), but also due to
regulation (Friedman and Miles, 2001). In a growing number of countries, there is national regulation that requires
pension funds to adopt an SRI approach and/or to disclose to which extent the fund includes SRI aspects (Eurosif,
2006).
A second factor which spurs SRI, according to previous research, is the presence of NGOs on the fi nancial arena
(Waygood and Wehrmeyer, 2003; Guay et al., 2004; Sjöström, 2007). Environmentally and social-justice-oriented
NGOs may share many concerns with SRI-oriented investors, with regard to corporate responsibility. In some
Western markets, NGOs are involving themselves in SRI by persuading a critical mass of shareholders to engage
in an issue, by building coalitions with shareholders (e.g., co-fi ling resolutions), and by temporarily becoming
shareholders themselves and exercising shareholder rights (Waygood and Wehrmeyer, 2003; Guay et al., 2004;
Sjöström, 2007).
Thirdly, studies highlight that in many Western countries, religious groups have provided a market for SRIoriented
investment for a long time (Kreander, 2001; Sparkes, 2001; Kreander et al., 2004; Williams, 2005), thus
facilitating the growth for SRI. SRI as an investment approach can be traced back to the eighteenth century with
the Methodist Church in the UK, and later with Quakers and other groups in both the UK and USA. The Swedish
Church has also been a pioneering force for SRI in Europe (Kreander, 2001). SRI remained dominated by religious
groups until the 1960s, when the stock market was also infl uenced by broader political values (Sparkes, 2002). It
is only in the last 20 years that SRI has come to focus on environmental and social issues to a signifi cant extent
(Sparkes, 2002), and now also religious groups are turning to these kinds of issues (SIF, 2006). In other words,
groups that have historically been involved in SRI have contributed to a sustained market for this investment
approach over time, also as its content has somewhat changed. The history of SRI facilitates a modern version of
SRI because it provides something to build from.
A fourth facilitator for SRI, which is not explicitly highlighted in academic literature, but for which there is
empirical evidence, is corporate governance, which clarifi es the roles and responsibilities of shareholders, companies,
and company boards (Eurosif, 2004). A particularly important dimension for SRI concerns the rights of
minority shareholders. Such rights are infl uencing the ease with which shareholders can pursue environmental
Facilitators and Impediments for SRI in Hong Kong 281
Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 16, 278–288 (2009)
DOI: 10.1002/csr
and social aspects of corporate matters via the stock market. In the USA, shareholders have the right to fi le shareholder
resolutions provided that they hold a certain amount of shares over a certain length of time. Minority
shareholders tend to be active fi lers of resolutions with regard to social and environmental matters (Monks et al.,
2004; SIF, 2006). In the UK, there is similar regulation, which makes it possible also for minority shareholders
to voice concerns at company AGMs, and which has spurred an established culture for shareholder activism
(Eurosif, 2006). In a number of other European countries, such as Germany, the Netherlands, Sweden and France,
shareholder activism is largely driven by minority owners (Eurosif, 2006).
Finally, an additional enabler for SRI which is not emphasized in academic literature, but for which there is
also empirical evidence, is that SRI is facilitated by the increased interest in CSR from the corporate sector. A
crucial part of CSR is transparency and accountability which implies a greater emphasis on disclosure (again, a
corporate governance issue). Solomon and Solomon (2006) fi nd that investors consider corporate disclosure on
social and environmental matters to be ‘decision-useful’, and want more of it as it is considered important to the
investment process. According to Eurosif (2004), disclosure is an important enabler for SRI because it makes it
possible for shareholders to ground a dialogue with companies based on facts rather than assumptions.
While yet other facilitators for SRI may exist, these stand out as particularly plausible based on previous literature
and empirical evidence. Table 1 summarizes the factors that we have identifi ed as facilitating growth of
SRI.
We also suggest that facilitators often strengthen each other. An NGO movement which actively uses the fi nancial
market for its purposes is helped by strong minority shareholder rights, while interventions by pension funds
to some extent rely on relevant corporate disclosure, which might in turn be improved through NGO pressure for
transparency.
Facilitators for SRI in a Hong Kong Context
Based on our interviews, we will now explore how the main facilitators for SRI, identifi ed above, relate to the
situation in Hong Kong.
Pension Funds
In Hong Kong, a new pension system was introduced in 2000, the Mandatory Provident Fund (MPF), which has
led to an increase from one-third to 85% of the Hong Kong workforce being covered by retirement protection
(MPFA, 2006). The new scheme does however not include ethical or environmental guidelines:
When we designed the MPF we looked to systems in other countries, and particularly the one in Australia. As for
including environmental or social dimensions in the investments, we leave it to the market. (Interview, senior
manager at the MPF Authority)
Within the MPF scheme, there are over 300 funds to choose from, and of these, one was an SRI fund at the time
of writing. It can thus be concluded that the pension system is not a driver for SRI in Hong Kong, and will not
be so unless the authorities decide to enforce SRI in the pension fund investment process.
Pension funds
NGO movement
Historical roots / pioneers
Minority shareholder rights / opportunities for shareholder activism
CSR and disclosure
Table 1. Factors that facilitate the growth of SRI
282 E. Sjöström and R. Welford
Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 16, 278–288 (2009)
DOI: 10.1002/csr
The NGO Sector
The interviewed corporations express that they are rarely or never targeted by NGOs. Further, the presence of
environmental groups or other NGOs at corporate AGMs in Hong Kong is rare. In Hong Kong, NGOs tend to
be dependent on corporate funding, which may be a reason why they do not seek to overtly infl uence corporate
environmental and social behavior via the stock market.
All NGOs target government. They feel that they have to monitor them. Business in Hong Kong is very powerful so
the NGOs don’t want to be on their bad side. Many of them get funding from business. (Interview, IRO)
One exception to this is Greenpeace, which attended the AGM of a utility company in Hong Kong and posed
questions regarding the company’s extensive use of coal. In addition to attending the AGM, Greenpeace placed a
banner outside the meeting location, and handed out fl yers. The company perceived that Greenpeace’s approach
was not constructive, since they chose a confrontational tactic that upset many shareholders (Interview, IRO).
It appears that the role of NGOs in targeting corporate behavior is underdeveloped and too weak to have spread
to the fi nancial market. It might potentially be an opening to increase shareholder pressure if tactics are changed
toward more corporation-focused efforts.
Historical Roots
In Hong Kong, the concept of SRI does not have the same historical, church-based or political antecedents, as we
fi nd in many Western countries. The market for SRI, that in some other countries has been created and sustained
over a long time due to the investment approach of religious or other groups, has not developed in Hong Kong.
The facilitating role of such pioneers is not in place here. It should be noted, however, that there are indeed religious
groups in Hong Kong, albeit not in a role as active shareholders.
Minority Shareholder Rights and Shareholder Activism
In Hong Kong, the prevalent ownership structure tends to disfavor minority shareholders (Welford, 2007). Familyowned
conglomerates and cross-holdings are common among the companies listed on the Hong Kong stock
exchange. This means that for many companies, the majority of shares is held by one person, family or holding
company, which leaves little room for minority shareholders to express views that differ from those of the major
shareholder.
In addition to this, AGMs in Hong Kong are typically attended by only a few investors, and do not function as
an arena for interested actors to express concern over environmental or social matters and to partake in decisionmaking.
Says one corporate respondent:
Very few people come to our AGMs. Maybe 20 people or so and mostly people who have been shareholders for ages.
(Interview, IRO)
There have even been reports of vocal shareholders being thrown out of such meetings (SCMP, 2006).
A representative of one of Hong Kong’s domestic SRI funds argued that it does not see itself in the same role
as interest-based organizations, and estimates that its potential impact on corporations in terms of CSR is
limited:
It is diffi cult in Asia. We want to allocate capital and support certain principles, but we are not playing the role of
Greenpeace or WWF. We don’t have the status of them. It would be fruitless. We are a mid-sized company. We can’t
tell companies to plant more trees. Even when those groups try to infl uence companies it goes in one ear and out the
other. We can pronounce what we believe in, but we are always a minority shareholder. (Interview, Chief Investment
Offi cer)
The role of minority shareholders is thus too limited for it to be a signifi cant facilitator for SRI in Hong Kong, not
only because of ownership structures, but also because, as our interviews indicate, there is a perception among
investors themselves that the voices of minority shareholder will not be heard.
Facilitators and Impediments for SRI in Hong Kong 283
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DOI: 10.1002/csr
CSR and Disclosure
The corporate sector in Hong Kong has embraced the concept of CSR only to a limited extent (Welford, 2005),
and the Hong Kong corporate sector does not seem inclined to address CSR issues through corporate voluntarism
(CSR China, 2006). There is consensus among the respondents that the major motivation for addressing corporate
social responsibilities is formal regulation, rather than voluntary initiatives:
Regulation is the main guideline for us. We would not overdo it, and we would not go under it. Regulation must be
a benchmark to which we adjust when it changes. (Interview, IRO a)
People look to standards. And they are set by the Government. If the Government doesn’t lead, it won’t happen.
A company won’t do something that is not profi table. Particularly with China right next to you. A profi toriented
company would not spend extra on meeting a level that is beyond the limits of the standard. (Interview,
IRO b)
In all honesty, most business would do it for regulatory reasons. It is a compliance issue. (Interview, IRO c)
As for disclosure, studies fi nd that Hong Kong trails behind other Asian economies when it comes to
having written policies on typical CSR areas (Welford, 2004; 2005). Studies also show that few of the Hong-Konglisted
companies publicly report on social and environmental issues (Chan and Welford, 2005; China CSR,
2006).
Hong Kong corporations tend to view disclosure as a compliance issue rather than a strategic tool for risk management
(Interview, Director of special interest organization for corporate governance in Asia). Moreover, many
Chinese companies are listed on the Hong Kong stock exchange, and these tend to have even lower levels of disclosure
than Hong Kong companies (Interview, Chief Investment Offi cer). The low level of corporate disclosure
is an obstacle for any investor who would like to include a CSR perspective into an analysis. By way of illustration,
when asked about the biggest challenge in assessing Hong-Kong-listed corporations, a representative of a foreign
SRI analyst organization responded:
Just general lack of information. There aren’t many companies publishing CSR reports or dedicated publications. Plus,
it is diffi cult to get feedback from the companies. The companies do not have a dedicated division or department and
we need to contact Public Relations or Investor Relations which are unlikely to respond.
. . .
In general, information disclosure on human rights and labor issues is very poor. For most Hong Kong companies,
information disclosure seems to be limited to fi nancial aspects plus some corporate governance information included
in the annual report. Lack of the companies’ willingness to address or publish information on labor issues may be due
to the fact that they don’t feel the necessity – that is, there is no pressure from investors, consumers, government or
regulators. (Interview, a senior research analyst)
We can conclude that a low take-up of CSR and a lack of associated disclosure is an impediment to SRI in Hong
Kong.
To conclude, we fi nd that the facilitators for SRI that we identifi ed in the previous section are, for the most part,
missing in Hong Kong. This is something which is not necessarily market-bound, but perhaps tied to a particular
institutional context, which we will expand on later. As mentioned in the previous section, many of the facilitators
are inter-related, which can explain why so many of them are not in place in Hong Kong. At the same time, this
creates opportunity for SRI in the sense that if only one or even a few of these factors gain a stronger foothold in
the Hong Kong market, they may function as catalysts for other facilitators as well, and ultimately strengthen the
position for SRI overall.
284 E. Sjöström and R. Welford
Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment Corp. Soc. Responsib. Environ. Mgmt. 16, 278–288 (2009)
DOI: 10.1002/csr
Discussion: Institutional Logics
Our study indicates that there is an overall barrier to SRI proliferating in Hong Kong which is strongly connected
to the openness of Hong-Kong-listed companies being limited to the more general idea of CSR. In this section,
therefore, we turn to sociological institutional theory and add a layer to our analysis by examining institutional
logics (which function as supra-organizational cognitive frameworks) and its role for SRI in general and in Hong
Kong in particular.
For analytical reasons, the fi nancial and business sectors in Hong Kong can be seen as a regional organizational
fi eld. An organizational fi eld is signifi ed by a notion that the organizations are parts in the same institutional context
(DiMaggio and Powell, 1983). Within an organizational fi eld there are taken-for-granted norms that portray certain
structures as suitable and natural, and these norms therefore contribute to an institutional logic, or ‘the socially
constructed, historical pattern of material practices, assumptions, values, beliefs, and rules by which individuals
produce and reproduce their material subsistence, organize time and space, and provide meaning to their social
reality’ (Thornton and Ocasio, 1999; p. 804). The dominant logic and its associated practices create a certain
identity, and are upheld by choosing to follow and enact agreed-upon norms and standards (Ahrne and Brunsson,
2006).
SRI can also be viewed as an (emerging) organizational fi eld.1 These two broad organizational fi elds (the business
and fi nancial fi eld in Hong Kong, and the SRI fi eld) are not entirely guided by the same institutional logics.
The corporate and fi nancial fi elds in Hong Kong are dominated by market logic. This in itself does not necessarily
distinguish it from markets where SRI is more established, but this logic is reinforced by the fact that Hong
Kong prides itself on being a free market economy, largely ruled by market forces. It has a laissez-faire capitalist
system, and is said to be the ‘freest economy on Earth’ (Heritage Foundation, 2008). The Government has a longestablished
philosophy of ‘maximum help and minimum interference’ for business (Hong Kong in brief, 2006).
SRI, in turn, is centered on a combination of market logic which hones profi t maximization and shareholder value,
and a social and environmental protection logic, which is based on notions such as common interests and values,
a shared responsibility toward future generations, and to some extent also on a view that the economic system is
not decoupled from ecosystems or from basic human rights. Figure 1 illustrates that the SRI logic bridges disparate
logics.
Hong Kong stands out as a free market, where the market logic dominates. Our interviews indicate that representatives
of Hong Kong’s fi nancial and business fi elds tend to view economic dimensions as separate from environmental
and social ones, and CSR is often perceived to be a cost which is not affordable in a competitive
business environment unless it enhances brand value or the like. This means that there is a perceived trade-off
between economic and ethical issues. Many respondents refer to the Hong Kong population in general as prioritizing
money over the environment and labor conditions, again indicating that these are separate and not necessarily
reconcilable dimensions:
1 Louche C. 2004. Ethical investment. Processes and mechanisms of institutionalisation in the Netherlands 1990–2002. Unpublished doctoral thesis.
Rotterdam: Erasmus University.
Figure 1. Institutional logics
Facilitators and Impediments for SRI in Hong Kong 285
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DOI: 10.1002/csr
I think the reason Hong Kong investors never ask [us] about the environment is the culture. People in Hong Kong are
very concerned with money. (Interview, IRO a)
We are very seldom contacted by investors about CSR. Investors are primarily interested in growth. I don’t think that
investors see any fi nancial materiality in CSR. [. . .] It costs money to protect the environment, and costs eat away
profi ts, and ultimately shareholder value. So it is always a balance, between fi nancial and environmental interests.
(Interview, IRO b)
Mature organizational fi elds, such as the business and fi nancial fi elds in Hong Kong, are generally not receptive
to different or unfamiliar institutions, particularly if these are informed by a different logic.2 SRI is thus not part
of what is viewed as legitimate in this fi eld. In order for SRI to become legitimate, it would need to be translated
by actors who are motivated to do so (Czarniawska and Joerges, 1996), and norms that hinder the adoption of SRI
need to be deinstitutionalized.3
Thus, the market logic as it unfolds in Hong Kong has hitherto not been receptive to the infl uence of any other
logic. It has not made much room for the idea that environmental and social prosperity does not stand in opposition
to economic prosperity (Porter and van der Linde, 1995), or that economic value is integrated with or even
dependent on environmental and social prosperity (Schumacher, 1973; Common and Stagl, 2005; Stern, 2006).
Hence, an organizational fi eld which is dominated by market logic will not automatically embrace an SRI logic.
The cultural and ideological underpinnings of the corporate and fi nancial fi eld in Hong Kong are embedded and
diffi cult to shift.
Conclusions
In this study, we have identifi ed fi ve factors that have facilitated SRI in markets where SRI is comparably prevalent
today: (1) the existence of pension funds governed or regulated so that social and environmental criteria become
embedded; (2) minority shareholder rights facilitating shareholder activism; (3) an active NGO movement willing
and able to use fi nancial markets to challenge business; (4) the adoption of CSR and associated corporate disclosure
by the business sector; and (5) the existence of historical roots of SRI which has enabled a modern version of SRI
to develop.
We fi nd that these factors are underdeveloped in Hong Kong, which can explain why the role of the fi nancial
market in Hong Kong for infl uencing CSR is so limited.
However, we go further, and also suggest that a major reason for the limited role of shareholders in infl uencing
Hong-Kong-listed corporations is that the market logic that dominates Hong Kong’s business and fi nancial sectors
is not particularly receptive to the logic of environmental and social protection. This is a powerful explanation of
why socially responsible investment has not been diffused in Hong Kong in spite of its prevalence in other markets.
The dominating institutional logic also stands in the way of CSR more broadly taking off in Hong Kong, and this
in itself is an obstacle to SRI.
We suggest that if environmental and social aspects are to be incorporated into business operations in Hong
Kong, then SRI and CSR need to be framed as profi t-related. If the environment, labor standards and human
rights are only viewed and talked about as moral issues and treated as an optional add-on, then little will change.
But if such issues are instead framed as components of risk management and strategic decision-making from an
economic perspective, there will be a better fi t with the dominating market logic of Hong Kong.
A change toward such fi nancial framing can, for example, be achieved by educating investors about the fi nancial
materiality of environmental and social issues, or by foreign, SRI-oriented shareholders expressing environmental
and social expectations of Hong-Kong-listed companies, or by local shareholder activists shifting much of their
2 Boxenbaum E. 2005. Micro-dynamic mechanisms of translation: A double case study. Unpublished doctoral dissertation. Copenhagen: Copenhagen
Business School.
3 Ibid.
286 E. Sjöström and R. Welford
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DOI: 10.1002/csr
current focus from moral to fi nancial arguments (Sjöström, 2007). NGOs may perhaps not infl uence the logic of
business and fi nancial actors, but through more activism directed at Hong-Kong-listed corporations, NGOs may
infl uence the extent to which environmental and social aspects become part of the business and fi nancial
agendas.
As Welford (2007) notes, many of the issues refl ected in Hong Kong are typical of the experience in Asia, more
generally. Indeed, parts of Asia often see Hong Kong’s growth path as one to be emulated. If Asian economies
are to fi nd a more sustainable development path, then it is clear that the corporations dominating Asia’s stock
markets have a particular role to play. The most powerful actor in the region, the corporations themselves, will
have to take the lead, through improved CSR practices. If SRI can come to infl uence corporate decision-making,
we are likely to see signifi cant benefi ts. At the current rate of change at corporate level, however, business may
experience the fi nancial aspects of social and environmental change through crisis.
While this study has contributed toward an increased understanding of SRI in an Asian context, it is based on
limited data. We would encourage additional, empirically grounded research on this important topic in order to
gain a fuller understanding of the role and the future of SRI as a catalyst for CSR in the Asian region.
Acknowledgements
Emma Sjöström wishes to thank Louis Fraenckels Stiftelse at Stockholm School of Economics for a travel grant to visit the
University of Hong Kong for six months, which enabled data collection and co-authoring of this paper.
Biographical Note
Emma Sjöström (PhD) is a co-founder of SuRe Sustainability Research Group at Stockholm School of Economics.
Her dissertation titled Shareholder Infl uence on Corporate Social Responsibility was completed in 2009.
Richard Welford is an Associate Professor at the University of Hong Kong. He is the editor of Corporate Social
Responsibility and Environmental Management and a Director of CSR Asia.
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