By David Risi

Time is a central aspect of sustainability as sustainable development is about both the present and the future. In 1987, the United Nations pointed out in the Brundtland Report that sustainable development satisfies present needs without disadvantaging future generations. Consequently, time is essential for sustainability-oriented business practices such as socially responsible investing. In addition to profit considerations, medium and long-term considerations of social well-being are also relevant for socially responsible investing. However, although the time dimension is of high relevance for sustainability, time has hardly been considered in previous research on socially responsible investing, which has focused more on questions of profitability.

Socially responsible investing has rapidly grown in recent years with a rising tendency. Socially responsible investing can contribute to sustainable development as this type of investment aims to bring about positive change in both the social and environmental spheres without neglecting the financial aspect. The common assumption is that socially responsible investments are made when this option is considered more, or at least as profitable as traditional, purely economically oriented investment strategies.

This qualitative, interview-based study focuses on socially responsible investing in the most influential banks and insurance companies in Switzerland. While banks and insurance companies have had considerable influence on the increasing popularity of socially responsible investing, how they adopt socially responsible investing may vary significantly. As an explanation for these differences, the study presents investment time horizons. While short-term horizon inhibits responsible investing, medium to long-term time horizons promote socially responsible investing. For instance, world poverty cannot be overcome by using financial performance measures whose time frame does not exceed five years.

Furthermore, it is shown that investment time horizons are crucial for the way socially responsible investing is conducted. For example, short-term risk orientation allows for a commitment to reactive socially responsible investing. This reactive practice is oriented towards excluding companies that manufacture harmful products such as tobacco or armaments. Proactive socially responsible investing, on the other hand, requires a longer-term orientation. A proactive practice, such as investor commitment to companies with a particularly sustainable approach through direct investments via shareholder activism, is only promoted, for example, through long-term incentive systems.

In sum, the study indicates how corresponding time horizons can be organized to advance the implementation of socially responsible investing in financial institutions. The empirically identified mechanisms associated with different time horizons help banks and insurance companies systematically anchor socially responsible investing in their core business. On the one hand, this enables them to respond more successfully to the ever-increasing demand for such investments and, on the other hand, to fulfill better their commitment to economic, social, and environmental sustainability.

Reference:

Risi, D. 2020. Time and business sustainability: Socially responsible investing in Swiss banks and insurance companies. Business & Society, 59(7), 1410–1440.