Universal Investors and Socially Responsible Finance : A Critique of a Premature Theory

This article investigates the theory of universal investors and their ability to be agents for socially responsible investing (SRI), with particular regard to the Canadian context. The influential theory depicts large financial institutions as motivated to reduce the social and environmental externalities of economic development that may affect the value of their investment portfolios. The theory, as both a description of how such institutions behave and a normative guide to how they should, is somewhat premature. This article assesses the strengths and limitations of the theory, surveys the putative SRI practices of some major Canadian financial institutions, and makes recommendations to improve the relevance and impact of the theory of universal investing