Yan, Ferraro, & Almandoz (2018). The Rise of Socially Responsible Investment Funds: The Paradoxical Role of the Financial Logic


Shipeng Yan – City University of Hong Kong

Fabrizio Ferraro – IESE Business School

Juan (John) Almandoz – IESE Business School


Tiffany Darabi – Cornell ILR School

Cathy Xuege Lu – Cornell Johnson School of Business

Article link: https://journals.sagepub.com/doi/10.1177/0001839218773324

Question 1. We would love to know more about how this project emerged and how it fits in with your broader research interests/portfolio. 

The paper emerged, as most collaborative projects do, at the intersection of Shipeng’s dissertation on SRI in China and beyond, Fabrizio’s broader research project on responsible investing, and John’s interest in institutional logics. All of us agree that the evolution of the financial sector will be crucial in defining whether capitalism will be able to address the grand challenges we face, and we believe that institutional analysis can help us shed light on this phenomenon. This paper also naturally extends and complements our earlier and on-going projects. For example, in the case of Shipeng, it builds on the qualitative fieldwork he conducted on SRI in China (Yan & Ferraro, 2016). He is currently researching the rise of novel forms of financial organizations in various contexts informed by an institutional analysis.

As for Fabrizio, he has been studying the evolution of the responsible investing (RI) field since 2008, trying to understand its dynamics and the role of different players (asset owners, asset managers, labor unions, governments, data providers) and practices (SRI, ESG, Shareholder Engagement). The uneven patterns of growth in the field across different countries were often discussed among the practitioners we interviewed, and this paper started as an attempt to explain them. In other related projects, Fabrizio has been studying the evolution of the ESG data provider field (Beunza and Ferraro, 2019), and the practice of shareholder engagement (Ferraro and Beunza, 2018). Currently, he is working towards developing a deliberative theory of dialogue in shareholder engagement and on two papers based on ethnographic data of impact investing firms.

John has been interested in the financial sector as being contested by multiple logics. The dominant financial logic in this sector, strongly focused on profit-maximization, is likely always to be there, but it has been—and will likely continue to be—accompanied by other prosocial institutional logics. For him, this paper is an extension of his earlier work on the community logic in banking (Almandoz, 2012, 2014). It inspired him to think more broadly about societies and he is working towards developing a theoretical paper that will bring the literature on institutional logics to bear on the question of the evolution and thriving of societies.

Question 2. Your paper proposes a theoretical lens for teasing out commercial/social logics from the angle of “means” versus “ends”. Did you originally think of this paper as something focused on the means and ends of dominant logics or did that framing evolve over time? How did it evolve?

We did not think of means and ends at the beginning of the paper. Their role in the paper evolved progressively as we reflected on the complex relationship between the dominant financial logic and the founding of SRI in different countries. The very first draft of the paper (March 2015) made no reference to means and ends, but we were already focused on questioning the singular negative impact of the financial logic on social ventures. The paper evolved along other dimensions and for the first time used the term “means” and “ends” in a June 2015 version. We were inspired by many interviews with finance practitioners who saw SRI as an opportunity to leverage their skills for good.

Question 3. Can you speak to the challenges of publishing mixed methods papers? What do you feel the advantages are to having both qualitative and quantitative data in your paper? 

Our field work, both the broader project on responsible investing and the ethnography in China, was crucial in multiple ways: 1) it helped us identify a research question that was both important for practice and theoretically relevant, 2) identify possible theoretical mechanisms, and 3) identify and access sources of data. For instance, we started thinking about the role of labor unions during our field work, as we observed that union leaders played a key role in public pension funds and were among the key players in the foundations of the UN-sponsored Principle for Responsible Investing.

The use of qualitative evidence gives readers additional confidence in our argument. For example, in building our hypothesis on the role of religion, we started from the historical evidence on the role of Methodists and other protestant denominations in the emergence of SRI in the United States. But our fieldwork provided additional evidence that this mechanisms might be at work, as some informants told us that “Many Asians who started green-tech funds were Christians.” Even if the statistical result we anticipated with the religious hypothesis did not materialize, the interview evidence supported the reasoning behind the argument.

Similarly, we found that qualitative evidence bolstered crucial parts of the argument—for example, the “means” provided by the financial logic:

I have been in this industry for 20 years. What I do now is to apply finance skills in areas other than large banks. In social sectors, [these] skills are badly needed.

Or the conflict between the materialistic “end” of the financial logic and the social end of SRI:

In our company, if you go around and say SRI, they will go mad. ‘Could you quantify SRI impact [on returns] on a three-month basis?

Having said so, we also want to present a caveat. Initially, we were trying to organize the paper using a more explicitly mixed-method design. With the help of editors and reviewers, we realized that within the scope of the paper, we could neither do justice to our qualitative data, nor provide the necessary robustness checks in our empirical quantitative analysis. Thus, we decided to reorganize the paper as a quantitative study enriched with qualitative evidence.

Question 4. There has been a rising interest in exploring phenomena related to social enterprises and social finance related topics in recent years. How would you surmise that the findings of the paper might apply to the rise of ESG or other social-finance tools/funds aside from SRI? Where do you see other potential gaps to be filled on this topic?

The mechanisms identified in our study are not specific to SRI funds, but to any new fund in the broader space of responsible investing (thus, Environmental, Social and Governance investing, or ESG would be included).

The Responsible Investing field is now at an important juncture. One the one hand it is successfully mainstreaming. On the other hand, and perhaps because of its success, it is increasingly being criticized as greenwashing or as ineffective in dealing with our key global challenges (especially climate change).

We believe there are a number of potential gaps to be filled on this topic. First, our study highlighted the use of finance for social good but how individuals and organizations develop the “means” still remains under-researched. Second, most research on RI in the field of finance is primarily focused on financial returns, but much less on whether RI is effective in reshaping corporate environmental and social policies. Third, we need more research on the organizational challenges that asset managers face in making the transition to an ESG or RI organization. Finally, another important question relates to how RI will reshape corporate governance practices globally.

To address these gaps in the context of pro-social innovations in finance, we believe the institutional logics literature is a powerful lens to do so. There may be unexpected influences coming from seemingly disconnected parts of society. In this article we explore the role of unions, religion, and green parties that could influence the rise of SRI in the financial sector. In future research, it is useful to take into account multiple institutional logics and examine societies as a whole.


Almandoz, J. 2012. Arriving at the starting line: The impact of community and financial logics on new banking ventures. Academy of Management Journal55(6), 1381-1406.

Almandoz, J. 2014. Founding teams as carriers of competing logics: When institutional forces predict banks’ risk exposure. Administrative Science Quarterly59(3), 442-473.

Beunza, Daniel and Fabrizio Ferraro. 2019. “Performative Work: Bridging Performativity and Institutional Theory in the Responsible Investment Field”, Organization Studies, 40, (4), 515 –543.

Ferraro, Fabrizio and Daniel Beunza. 2018 “Creating Common Ground: A Communicative Action Model of Dialogue in Shareholder Engagement”. Organization Science, 29, (6): 1187-1207. 

Yan, S., & Ferraro, F. 2016. State mediation in market emergence: Socially responsible investing in China. (J. Gehman, M. Lounsbury, & R. Greenwood, Eds.) Research in the Sociology of Organizations, 48B: 173–206.

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