The imperatives of socially responsible funds

Abstract

Australian law mandates that from March 2004, issuers of consumer financial investment products report any ‘labour standards or environmental, social or ethical considerations taken into account’ when constructing investment portfolios. Guided by the financial services industry, the regulator issued reporting guidelines that allow product issuers to determine for themselves the format and content of the disclosures. A framework is developed to suggest that the financial services industry has managed reporting requirements on socially responsible investment to repel regulatory pressure, widen sales distribution networks and increase market share. Investment portfolios of many ‘socially responsible’ managed funds appear similar to those of conventional investments and in some cases are opposed to their investment policies. The ability of the legislative requirement to promote accountability is stymied because these funds must align themselves as close as possible to mainstream investments.