Socially responsible investment and the development agenda

Peering Behind the Progressive Veil of Non-Financial Benchmarking

Bibliographic Data

ID5769843
AuthorsSusanne Soederberg (0000-0001-9246-3560, Queen's University, corresponding author)
Year2007
Volume28
Issue7
Pages1219-1237
Publication date2007-09-23
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueThird World Quarterly (JOURNAL)
Journal identifiersISSN: 0143-6597 • E-ISSN: 1360-2241
PublisherTaylor & Francis (PUBLISHER • GB)
DOI10.1080/01436590701547046
OpenAlexW1984360414
LanguageEN
Citations received4
References cited9

One of the most striking trends in global development finance has been the growing role of Western-based, institutional investors. Pension funds in particular have played a leading part in supplying capital to publicly traded corporations in emerging market economies. An important feature of this type of financing has been the trend to make investment conditional not only on sound economic fundamentals, but also on a series of non-financial (or social) risk indicators (eg meeting labour standards and human rights). Despite the significance of non-financial benchmarking, these strategies have not been subjected to critical analysis, especially with regard to their wider impact on the reproduction of the mainstream development paradigm. This article addresses this gap by focusing on the benchmarking strategies of one of the world's largest pension funds: the California Public Employees' Retirement System (Calpers). Calpers's rating instrument, the Permissible Country Index (pci), employs both financial and non-financial risk indicators to screen its investments in 27 emerging markets. I argue that, despite its progressive sheen, the pci not only reproduces but also reinforces neoliberal forms of discipline and exploitation in the global South. It does this through coercive measures, such as divestment (ie removing a country from the pci), as well as through the construction of specific forms of knowledge that act to normalise the expansion and restructuring of spaces of capital in the global South. Notes 1 Although highly subjective and economistic, the World Bank's definition of emerging markets or middle-income countries is based on a country's Gross National Income (gni) per capita equivalent to more than $756 but less than $9265 in 1999. Middle-income countries are further divided into upper-middle income countries (eg Turkey, Malaysia, Chile) and lower-middle income countries (eg the Philippines, Nicaragua, Namibia). For more information, see web.worldbank.org. 2 Mekong Private Sector Development Facility (mpdf), 'Expanding horizons: equity finance in Vietnam', International Finance Corporation, 18 August 2004, at www.mpdf.org, accessed 2 January 2006. 3 'How the developing world is striving to free itself of debt', Financial Times, 8 February 2007, at www.ft.com/cms/s/caf85732-b7e1-11db-bfb3-0000779e2340.html, accessed 8 February 2007. 4 Fiduciary responsibility simply refers to the duty or obligation of the person or organisation handling the funds on behalf of another party to act in a manner that is in the latter's best financial interest, eg seeking the highest returns with the minimum amount of risk. 5 See www.unpri.org/about/, accessed 2 March 2007. Key global actors in the financial community have also turned to sri as a means of gauging sound investment climate in emerging markets, such as PricewaterhouseCoopers' Opacity Index. The Dow Jones Sustainability Index offers investors corporate sustainability assessments of opportunities and risks relating to sustainable factors. 6 See, for example, S Andreasson, 'Orientalism and African development studies: the "reductive repetition" motif in theories of African underdevelopment', Third World Quarterly, 26 (6), 2005, pp 971 - 986. See also the introductory essay by Michael Blowfield, 'Reasons to be cheerful? What we know about csr's impact', Third World Quarterly, 28 (4), 2007 (special issue), pp 683 - 695. 7 This reflects market value as of market close on 27 April 2007. For more information, see www.calpers.ca.gov. 8 The one exception is Hebb and Wojcik, although the authors remain within the confines of what RW Cox refers to as a 'problem-solving' approach as opposed to a 'critical perspective'. RW Cox, Production, Power, and World Order: Social Forces and the Making of History, New York: Columbia University Press, 1987. 9 See K Marx, Capital, Vol 1, London: Penguin, 1990; and D Harvey, The Limits to Capital, London: Verso, 1999. 10 Social Investment Forum, Report on Socially Responsible Investing Trends in the United States-10-Year Review, Washington, DC: Social Investment Forum, 2005. 11 Wilshire Consulting, 'Exposure draft-permissible equity markets investment analysis', report prepared for the California Public Employees' Retirement System, January 2006. 12 Ibid. 13 C Adams, G Frost & W Webber, 'Triple bottom line: a review of the literature', in A Henriques & J Richardson (eds), The Triple Bottom Line: Does It All Add Up?, London: Earthscan, 2004, p 20. 14 P Camejo, The sri Advantage: Why Socially Responsible Investing has Outperformed Financially, Gabriola Island, BC: New Society Publishers, 2002, p xv. 15 The sub-factors of political stability are defined by Wilshire in the following manner: 'Civil Liberties: The extent to which countries permit freedom of expression, association and organizational rights, rule of law and human rights, free trade unions and effective collective bargaining, personal autonomy and economic rights. Independent Judiciary and Legal Protection: The extent to which countries have independent judiciaries, the degree to which or the absence of irregular payments made to the judiciary and the extent to which there is a trusted legal framework that honours contracts and clearly delineates ownership of and protects financial assets. Political Risk: The extent to which there exists government stability, a high quality of socio-economic conditions, and a positive investment profile. Toward these ends this sub-factor evaluates the extent of internal and external conflict, corruption, the military and religion in politics, law and order, ethnic tensions, democratic accountability and bureaucratic quality.' Wilshire, 2006, p 6. 16 For more information regarding the methodology employed in calculating 'freedom scores', see 'Methodology' at ww.freedomhouse.org/template.cfm?page=35&year=2005. 17 To view the methodology employed by the prs Group with regard to 'political risk', see their website at www.prsgroup.com/commonhtml/methods.html. 18 Wilshire, 2006, p 6. 19 'Research Services', Verité, at http://www.verite.org/research/main.html. For more detailed information regarding the methodology and findings of Verité, see 'Emerging markets research project: year-end report', document prepared for California Public Employees' Retirement System, December 2004, at www.calpers.ca.gov/eip-docs/investments/assets/equities/international/permissible/calpers-verite-final-report-2004.pdf, accessed 15 February 2005. 20 Wilshire, 2006, p 7. 21 Ibid. 22 'US pension fund quits Asian countries', bbc News, 21 February 2002, at http://news.bbc.co.uk/2/hi/business/1833674.stm, accessed 2 May 2007. 23 See, for example, M Mamdani's critique of the Darfur divestment campaign in the USA. Mamdani, 'The politics of naming: genocide, civil war, insurgency', London Review of Books, 29 (5), 2007, at www.lrb.co.uk/v29/n05/mamd01_.html accessed 5 November 2007. 24 G Rist, The History of Development: From Western Origins to Global Faith, London: Zed Books, 2002, p 214. 25 S Soederberg, The Politics of the New International Financial Architecture: Reimposing Neoliberal Domination in the Global South, London: Zed Books, 2004. 26 International Finance Corporation, 'Emerging markets heading for banner year in 2006: ifc notes progress, development challenges ahead', 2005, at www.ifc.org/ifcext/home.nsf/Content/Emerging_Mkts_2006, accessed 14 December 2005, emphasis added. 27 A. Escobar, Encountering Development: The Making and Unmaking of the Third World, Princeton, NJ: Princeton University Press, 1995, p 9. 28 Ibid, p 53. 29 H Lefrebvre, The Production of Space, Oxford: Blackwell, 1991. 30 Ibid; and D Harvey, Spaces of Capital: Towards a Critical Geography, London: Routledge, 2001. 31 K Marx, Capital, Vol 3, London: Penguin, 1981, ch 15. 32 Harvey, Spaces of Capital. 33 D Harvey, 'The "new" imperialism', in Leo Panitch & Colin Leys (eds), Socialist Register, London: Merlin Press, 2003, p 64. 34 Harvey, The Limits to Capital, p 434. 35 Wilshire, 'Exposure draft', p 2. 36 D Harvey, The Urban Experience, Boston, MD: Johns Hopkins University Press, 1989, ch 6. 37 J Zhuang, D Edwards, D Webb, Ma Virginita & A Capulong, Corporate Governance and Finance in East Asia: A Study of Indonesia, Republic of Korea, Malaysia, Philippines, and Thailand, Manila: Asian Development Bank, 2000. 38 See Escobar, Encountering Development, ch 1. For another critique of economism in development in relation to Peru, see T Teivainen, Enter Economism, Exit Politics: Experts, Economic Policy and the Political, London: Zed Books, 2002. 39 Escobar, Encountering Development, p 59. 40 Ibid, p 65. 41 Soederberg, The Politics of the New International Financial Architecture. 42 Harvey, The Limits to Capital, p 276. 43 D Harvey, Spaces of Hope, Berkley, CA: University of California Press, 2000, p 178. 44 See, for example, N Poulantzas, State, Power, Socialism, London: Verso, 2000. 45 E Said, Orientalism, New York: Vintage Books, 1979; and Escobar, Encountering Development, p 9. 46 Based on 191 member countries of the United Nations as of April 2006. See www.un.org/Overview/unmember.html. 47 Escobar, Encountering Development, p 53. 48 World Bank, World Development Report 2005: A Better Investment Climate for Everyone, Oxford: Oxford University Press, 2004, p 35. 49 World Bank, World Development Report 2002: Building Institutions for Markets, Oxford: Oxford University Press, 2002, ch 5. 50 World Bank, World Development Report 2006: Equity and Development, Oxford: Oxford University Press, 2005, p 9. 51 Escobar, Encountering Development. 52 E Altvater, Socialist Register, London: Merlin Press, 2002, p 79. 53 J Hutchison, 'Crisis and change in the Philippines', in G Rodan, K Hewison & R Robinson (eds), The Political Economy of South-East Asia: Conflicts, Crises, and Change, Oxford: Oxford University Press, 2001, pp 42 - 70. 54 TL Caraway, 'Freedom of association: battering ram or Trojan horse?', Review of International Political Economy, 13 (2), 2006, pp 210 - 232. 55 For more information, see K MacDonald, 'Globalising justice within coffee supply chains? Fair Trade, Starbucks and the transformation of supply chain governance', Third World Quarterly, 28 (4), 2007 (special issue), pp 793 - 812

Benchmarking · Investment · Peering · Economic Theory and Policy · Housing, Finance, and Neoliberalism · State Capitalism and Financial Governance

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