Despite increasing advocacy for Socially Responsible Investment (SRI), wider institutional uptake continues to be slow. Helen Mussell offers a new perspective on why barriers to SRI may exist. Rather than focusing on legal constraints, she explores resistance as a result of the masculinized culture of institutional finance. This culture results from an industry underpinned by economic theory predicated in mathematical theorizing, theorizing dependent on an atomistic and individualistic concept of social reality in order for the math to work. It is an industry reliant on the premise of the rational self-interested agency of homo economicus, or rational economic man. In contrast, SRI – with its explicit environmental, social, and governance (ESG) ethical agenda, and other-regarding emphasis – directly challenges these premises. Using the philosophy of care ethics to outline the argument of how other-regarding behavior, including ethical investment decision making, constitutes caring behavior, Mussell shows SRI not only challenges the limited moral agency of homo economicus, but also confronts the presupposed atomistic social reality embedded in values-free neoclassical economic theory. The crux of the study is that the slow uptake of SRI is, in part, due to its implicit caring ethical agenda, an agenda that clearly jars with that of the wider institutional finance culture within which it operates.
Methodology. To successfully draw out the ethical and ontological arguments, Mussell undertakes an analysis of the worldviews – or presupposed concepts of social reality – implicit in both SRI and wider institutional mainstream finance. This analysis focuses on two main areas of interest: 1) dominant economic theories and associated methods used by both SRI and wider institutional mainstream finance, and 2) the culture upon which they are premised. For the analysis of wider institutional mainstream finance, it is specifically asset fund management and its extensive use of Modern Portfolio Theory (MPT) that becomes the focus. For SRI, it is the investment strategy of ethical screening and the moral agency it exercises. Mussell also undertakes a wider analysis of the gendered history of institutional finance in order to situate and compare and contrast the findings of the ontological analysis of these economic theories.
Main findings. Mussell shows that MPT has its roots in the Chicago School of Economics and the neoclassical tradition: omitting values, emphasizing rational self-interest, and relying on the presupposed atomistic ontology embedded in mathematical theorizing. SRI, on the other hand, employs investment strategies involving ethical screening, often overriding the short-term profit maximization so central to MPT. SRI is also explicitly other-regarding, and emphasizes a relational social ontology of a connected social reality, where investments have interdependent impact. Indeed, both the moral agency and social worldview exercised through these two investment strategies appear to stand at odds; an atomistic individualistic ontology is contrasted with a relational-values, other-regarding ontology. And with the culture of wider institutional finance drawing heavily from the premises identified in the caricature of rational economic man and its associated atomistic ontology, a central barrier for SRI is explicitly identified as one of one who dares to care in the world of finance.
Implications. Mussell concludes by outlining three suggestions to tackle the identified cultural challenges embedded in institutional finance. First, she outlines a requirement to urgently update economics education via a pluralist curriculum, reaching beyond the current confines of the neoclassical tradition. Second, she discusses the need to expand the vision of how fiduciary is both taught and interpreted in financial practice. And finally, she highlights a reconsideration and refresh on the concepts and discourse used to discuss care in a masculinized environment, in order to increase the uptake of SRI and sustainable finance.