Inderscience Publishers

Socially responsible investment and avoidance of controversial sectors: on isomorphic processes and the quest for legitimacy

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A common method for shareholders with a 'Socially Responsible Investment' (SRI) approach is to systematically avoid controversial sectors, such as alcohol, weapons, gambling and tobacco. This article seeks to understand why the avoidance method is so prevalent among SRI funds and indices even though it can be argued that it is not efficient in influencing corporations' social responsibility. Based on neo-institutional theory, the study finds that the widespread use of the method can be understood as a way to comply with society's expectations, reduce ambiguity, and enhance legitimacy, and thereby improve the prospects of survival.

Keywords: socially responsible investment, SRI, avoidance screening, sustainability index, institutional theory, sustainable investment, corporate social responsibility, CSR, neo-institutional theory, controversial investments, industrial ecology

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