Sustainable investing that goes beyond divestment or engagement does most

investmentnews.com:

In the sustainable investing world, motivating companies to do better has happened through two basic strategies: divestment and engagement — and new research shows that using elements of both can accomplish the most.

That won’t be news to investment providers and advocacy groups that specialize in sustainable investing — some have spent decades refining ways to prod corporations into action, whether that’s improving environmental practices or treating workers more equitably. But to asset managers that offer only a taste of sustainable options, or for investors just getting started on ESG, the findings could provide a road map.

The paper, The Impact of Sustainable Investing: A Multidisciplinary Review, was published in the Journal of Management Studies. The authors outline what they call “field building,” a combination of strategies to improve sustainability by using elements of portfolio screening and shareholder engagement.

“Field building means that investors influence companies by changing the (1) stakeholders and (2) assumptions, norms and rules that surround companies, thereby exerting their influence on companies indirectly,” the authors wrote in an overview of their research in the Harvard Business Review.

Investors don’t need to be the size of BlackRock or Vanguard to accomplish that, the research implies. Smaller investors can file shareholder resolutions and launch campaigns that get the attention of bigger investors, such as pension systems, which can then use their influence to get companies to adopt more sustainable practices. And once one company makes a change, there can be a snowball effect.

A prime example was seen in the palm oil business, said Leslie Samuelrich, president of Green Century Funds. Eight