Frank Wagemans

The financial sector is rarely the first industry that comes to mind when discussing sustainability, yet the flows of capital from investors are financing a wide range of sustainable and unsustainable activities worldwide. Socially Responsible Investment (SRI) is a way in which investors can take into account sustainability topics in investment management. Over the past three decades, SRI has grown rapidly worldwide; membership in the United Nations Principles for Responsible Investment rose from ten in 2006 to more than five thousand in 2025, and assets tied to SRI now exceed USD 30 trillion. This has also led to an increasing number of studies on SRI. SRI is the term used in this thesis, although there are multiple similar terms applied to describe the integration of societal issues into investment management. Other terms that are commonly used and have similar, or overlapping, meanings include responsible investing, sustainable investing, ethical investment, sustainable finance or Environmental, Social and Governance (ESG) investment. These terms are sometimes employed synonymously for SRI, but sometimes they can also have different emphases or describe practices in specific markets. The fact that there are multiple terms for this process is not surprising, as there are several motivations for practicing SRI. From normative motivations, the motivation to achieve better investment returns or a motivation to react to regulatory or societal pressure. Not only motivations can differ, also the implementation of SRI can differ as there are several ways SRI can be implemented: from the use of different SRI instruments, such as exclusion, ESG integration, proxy voting, engagement, to impact investments. This results in a diversified landscape of SRI practices that is rapidly developing and branching out in reaction to societal developments and increasing capabilities within the investment community. However, the literature on SRI is fragmented across finance, management, and social sciences, with limited interdisciplinary collaboration. Most existing research concentrates on the relationship between SRI and financial performance, leaving the societal impact of SRI largely understudied. This thesis therefore centres on two core questions: when does SRI generate societal change, and which factors influence the development of SRI? Chapter 2 discusses the effectiveness of SRI to generate societal change. A literature review was used to provide an overview of the studies on SRI instruments, their pathways for influencing investee companies and whether and how they lead to societal change. When focusing on SRI instruments that can potentially influence the cost-of-capital, such as exclusion and ESG integration, this is currently not an effective way of evoking societal change when studied in isolation. Studies have shown that significant differences in cost-of-capital are potentially possible, but currently, they do not arise, as a substantial percentage of investors worldwide would need to adopt a specific exclusion or ESG-tilts to have a major impact on the cost-of-capital of listed companies. For engagement, a clear picture of its effectiveness did not arise, as it was at the time of writing understudied. In summary, the chapter concludes that the impact of SRI was limited and difficult to identify and quantify. In answering the research question on which factors govern the effectiveness of SRI in influencing ESG performance, five factors can be identified that explain why the effects of SRI are currently marginal: 1) investors have a low level of knowledge of SRI; 2) the percentage of SRI is still small compared with overall investments; 3) investors are focused on obtaining short-term shareholder value; 4) the interpretation of institutional investors of fiduciary duty; and 5) cooperation between shareholders practicing SRI is low. In Chapter 3, the networks that steer engagement and the factors that influence the effectiveness of engagement by Dutch pension funds were studied. Twenty-three interviews were conducted with actors implementing engagement as well as investees. Additionally, quantitative data from the yearly “Benchmark Responsible Investment by Pension Funds” were used. The study shows that engagement is increasingly used by Dutch pension funds. However, the actual implementation is outsourced to networks of actors within the investment chain, such as asset managers or specialised ESG service providers. However, these networks are isolated from other non-investor actors such as NGOs and policy actors. To study the effectiveness of engagement, the work of Gifford (2012) on shareholder salience was used as a starting point. The chapter concludes that shareholder salience is indeed a useful starting point for assessing the effectiveness of engagement. This means that three main factors are key to making engagement effective. First, legitimacy refers to the credibility of the engagers, the investor, and the strength of both the business and societal case. Second, urgency captures the time sensitivity of the engagement requests and their criticality. Third, power involves using various tools to increase pressure, ranging from formal shareholder rights to public statements. Two additional factors were found: the duration of the relationship between the engager and the investee and the receptivity of the investee company to the engagement, which also relates to the internal power dynamics within the investee. The chapter also concludes that SRI engagement does not reach its full potential in evoking societal change. Investee companies see that investors do not fully use the capacities and instruments at their disposal, especially in relation to their formal shareholders’ rights and being vocal publicly. Engagement can be strengthened by using shareholder resolutions, increasing cooperation between investors, and leveraging the specific knowledge of NGOs. In Chapter 4, the adoption of SRI among Dutch pension funds is addressed, particularly if there are logical pathways for SRI development. In the adjacent field of CSR, stage models provide insights into logical pathways for CSR adoption. On the basis of a translation of CSR stage models to SRI practices, 5 expectations for SRI development were tested. The results show that CSR stage models can plausibly be applied to SRI. In line with CSR stage models, target setting and the involvement of stakeholders are most likely accomplished through pension funds that already follow well-developed SRI practices. In short, SRI development starts with implementation, and only in later stages does it become a part of governance, strategy and integration in target setting. Additionally, there is a clear order followed in the implementation of SRI instruments: to begin, certain investments are excluded; then, environmental, social and governance (ESG) integration is performed; and finally, so-called impact investing (which focuses on more than only financial results) is implemented. Chapter 5 focuses on the factors that could cause convergence or divergence in SRI practices. This is done by using a multiyear dataset of SRI practices of Dutch pension funds and expectations formulated on the basis of institutional theory. The results show that SRI practices of Dutch pension funds developed over the period 2010-2022 and that this has led to convergence over time, especially in relation to the reporting on SRI practices. Having the same fiduciary manager is associated with increased convergence between pension funds. Assets under management, beneficiaries’ characteristics or financial position are not associated with further convergence between pension funds. In summary, SRI always seems to have the promise that it would evoke societal change. The findings paint a more nuanced picture of the (potential) impact of SRI. It starts with the observation that SRI is a very broad concept that covers a wide range of practices and motivations. The question of whether SRI is effective therefore starts with sub-questions on whether specific SRI instruments or combinations of these instruments are effective. In regard to influencing the cost-of-capital through exclusion or ESG integration, it is concluded that these pathways potentially can be effective in evoking change. However, our study finds that this is currently not the case for listed investments. Investors can also influence investees directly through engagement and through voting practices. For engagement, it is concluded that engagement is potentially effective, but its actual effectiveness is dependent on several factors: from legitimacy, via urgency to power. Additionally, relation building, taking into account the corporate agenda and decision-making processes and escalation mechanism to use more formal power mechanisms are relevant. Regarding the research question on the development of SRI, it can be summarised that SRI development follows logical pathways, starting with capacity building and only in a later stage reaches integration into governance and strategy. For Dutch pension funds, we find that SRI practices converge over time and that the role of the fiduciary manager is a factor associated with increased convergence. This highlights the relevance of institutional theory for SRI development, the role of society in shaping SRI, and the role of the investment chain in enabling, or disabling, SRI practices. Reflecting on the findings, this thesis argues that merely practising socially responsible investing (SRI) does not guarantee impact; the effectiveness of SRI depends not only on the instruments employed but also on the maturity of the institutional investor that deploys them. Four interrelated factors shape this connection. First, capacity and expertise are essential. An investor may be willing to use tools such as exclusion screening, ESG integration or impact investing, yet without the necessary data infrastructure, analytical skills and thematic knowledge, these tools cannot be applied effectively. This research shows that successful engagement, for instance, rests on the legitimacy of the engager, which in turn requires solid expertise, reliable data and insights in often complex ESG themes such as human rights or biodiversity that demand qualitative assessment. When investors signal SRI credentials without the organisational resources to substantiate them, a phenomenon dubbed “competence greenwashing” emerges, undermining both development and impact. Moreover, the broader investment chain matters: data providers translate emerging ESG information for managers, but recent political pressures have led some providers to withdraw coverage of contentious topics (e.g., Gaza, diversity metrics), thereby constraining investors’ ability to act. Second, integration into strategy amplifies effectiveness. When SRI tools are combined, such as linking engagement with shareholder resolution filing or public divestment, their collective power increases. The study finds that only in the later stages of SRI development it becomes a formal element of governance, allowing institutions to embed impact-escalation mechanisms and coordinate multiple instruments, which provides a sturdier foundation for achieving societal outcomes. Third, the underlying motivation of the investor influences both the willingness to invest in capacity and the propensity to accept tradeoffs. Investors may be driven by pure financial rationality, ethical concerns, a desire for societal impact, or marketing considerations, and often in combination. Those investors motivated chiefly by financial returns tend not to align processes toward measurable impact, whereas impactoriented investors are more likely to allocate resources to engagement and accept lower returns where necessary. Finally, the societal and regulatory context frames what SRI can achieve. Fiduciary duty interpretations, beneficiary pressures, and broader public debates (e.g., divestment from fossil fuels or cluster ammunition) shape both the incentives and constraints faced by institutional investors. Regulations can enable SRI, but they can also restrict it when legal definitions of fiduciary duty limit the use of certain tools. Pension funds illustrate this dynamic: beneficiaries and interest groups can push for SRI mandates, yet actions can be constrained or enabled by evolving regulatory landscapes. Together, these dimensions, capacity, strategic integration, motivation, and external context, constitute the key drivers that determine whether SRI development translates into societal impact. This thesis offers three practical recommendations for policymakers and institutional investors. First, pension fund boards should prioritise capacity building throughout the entire investment chain and stay attuned to societal trends. Because SRI adoption tends to evolve organically rather than through a linear “plan-do-check-act” cycle, funds need to develop both hard capabilities, such as data systems, and softer governance elements, such as embedding ESG expertise in decisionmaking. They must also engage with beneficiaries and other stakeholders, translating emerging ESG concerns into concrete investment actions and communicating the rationale behind SRI choices. Second, investors seeking genuine societal impact should look beyond direct engagement with portfolio companies. Partnering with NGOs, participating in sovereign-level dialogue, and deliberately crafting field-building and signalling strategies can amplify influence. Effective field-building requires dedicated expertise, resources, and clear mandates that align the investor’s voice with broader policy and advocacy efforts. Third, institutions need to foster multidisciplinary collaboration. SRI is shaped by financial, ethical, regulatory, and political forces, so relying solely on finance-trained staff limits the ability to understand and respond to non-financial drivers. Embedding professionals from diverse backgrounds and creating decision-making processes that encourage cross-disciplinary debate will improve the quality of SRI implementation and help navigate complex issues such as human-right exclusions, DEI considerations, and evolving regulatory regimes. Regarding future research, I identify four important pathways. First, the interaction within the investment chain remains poorly understood. Detailed investigations are needed on the dynamics between asset owners and their managers, the influence of ESG data and service firms, and the role of platforms, stand-setting bodies and educational providers in the financial ecosystem. Second, the impact of SRI on investees and society requires broader scrutiny beyond cost-of-capital effects, for which robust academic evidence is lacking. Researchers should explore indirect pathways, such as field-building, that may generate societal change, identifying the conditions under which these mechanisms succeed, and the organisational prerequisites investors must meet. The rapid growth of impact investing also calls for empirical work to confirm whether it truly delivers societal benefits and, if so, which factors drive its effectiveness. Third, the driving forces behind SRI adoption deserve deeper analysis. Investors pursue SRI for heterogeneous reasons, leading to divergent implementation routes. Recent political shifts (e.g., the U.S. retreat from ESG under the Trump administration) and anti-greenwashing measures such as the EU SFDR illustrate how external pressures intersect with internal motives. Understanding how these forces interact across markets and investor types will illuminate why some institutions advance SRI while others retreat. Finally, the theoretical foundations of SRI need enrichment. The field currently draws on a patchwork of lenses rather than a single cohesive framework, reflecting the diversity of actors, markets and instruments involved. The thesis proposes an initial typology of existing theories and suggests that future work combines multiple perspectives to create a meta-level framework capable of capturing the complex, multidimensional nature of SRI development and practice. In summary, while SRI has the potential to drive societal change, its actual impact depends heavily on the instruments used, the extent to which SRI is developed within an institutional investor, and the external societal and regulatory environment. Only when all these elements are aligned SRI can make a meaningful contribution to a more sustainable society.