Book Reviews: Socially Responsible Investment Law: Regulating The Unseen Polluters

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Keywords: Sustainable development, environmental liability, attribution of environmental costs, post-enlightenment economic rationality, preventative principles, environmental authoritarianism.

Since publication of Socially Responsible Investment Law we have witnessed the 'credit crunch' and its aftermath, with concerns now widespread as to the risks of so-called light-touch regulation of financial markets. Here, in exploring wider perspectives of preserving a sustainable environment, a recurring focus is on what Richardson describes as a lacuna in attributing environmental costs to 'front-line companies' and not to the indirect operations of those who allocate capital. His response is to pursue the relationship between socially responsible investment (SRI) and sustainable development, addressing the problem of under-regulation. His demanding objective is to offer ways in which SRI could be entrenched as a dominant consideration in financing decisions. The book's narrative thus concerns the soul of SRI, and rejects its widespread capture by a business-case (i.e. business-as-usual) model in favour of one founded on ethical, ecological precepts. An insistence on redressing this conflict pervades the argument, contrasting the status quo (of short-termism and related reward systems) with more enlightened values and forms of governance.

Before turning to the main themes it is worth identifying three contextual comments that are buried but convincingly addressed in the text: first, that - in a way that calls to mind Val Plumwood's 'post-enlightenment economic rationality' that shifts power toward remote global elites (Environmental Culture: the Ecological Crisis of Reason, 2002) - in the era of globalisation, financing decisions, as concrete expressions of neoliberal market priorities, are themselves increasingly remote from their social and environmental effects; secondly, that the market model's systemic failures have resulted generally in not only weak accountability but also 'environmental pillage* (10); and, thirdly, that whilst markets do not exist in a state of nature, that is without law, 'neither do they necessarily yield easily to legal intervention' (279). Furthermore, of numerous fine disquisitions on the capacities of environmental law in these challenging contexts, two perhaps stand out. Chapter 3 contains an illuminating discussion of the tension between market capitalism and the protection of natural capital, evidenced in problems of externality and ecological undervaluation. Another provocative offering covers the difficult territory of financiers' environmental liability (345-58), with astute, concise comment on the impacts of strict and joint and several liability, and looking beyond the limited reach of lender liability to possibilities for imposing levels of accountability that reflect the influence of the financial sector as 'unseen polluter' (355).

Turning to the book's structure, following the scoping first chapter, there are seven further chapters, which for all the inevitable cross-over effects offer distinctive themes. Chapter 2 deftly explains the working of the financial system, and goes on to chart the broad methodologies of SRI, expressing concerns, in light of the dominant business-case approach, that its raison d'etre may have been eviscerated. Chapter 3 then offers an assessment of SRI's record, starting from a premise rejecting arguments that institutional investors as 'universal owners' are best placed to promote sustainable development. Moreover, despite laudable SRI goals -for instance, to develop reformed valuation tools - obstacles can be seen to stack up. These include, beyond the domestic system, severe problems of governance in the international sphere. In terms of direct control, the author identifies endemically defective levels of intra-sectoral cooperation, a limited reach of existing niche collaborative vehicles and practical problems of agency (especially what motivates and controls fund managers). The treatment of fiduciary duties (205-20) is illuminating, and here the nub of the problem underlying the book can be identified: how to go beyond traditional, narrowly conceived conceptions of financial benefit, where SRI's more enlightened ideas have made little progress.

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