Economic sociology

Impacts of Finance & Financing of Impacts (session 1 of 3)

June 28, 2021 10:45
June 28, 2021 12:15

Lena Ajdacic, University of Lausanne; Felix Bühlmann, University of Lausanne; Fabien Foureault University of Lausanne; Noé Kabouche, University of Neuchatel & Sciences Po, Paris; François Schoenberger University of Lausanne


Anne Monier, ESSEC Business School

H. Nazli Azergun, University of Virginia

Noé Kabouche, University of Neuchâtel and Sciences Po - Paris

Pedro Araujo & Eric Davoine, University of Fribourg

Since the 1970s, financialization of economic life has turned finance, financial behaviors and financial mechanisms into omnipresent companions of our everyday life. Financialization is defined by Krippner (2005) as a “pattern of accumulation in which profits accrue primarily through financial channels rather than through trade and commodity production”. This evolution goes along with a massive spread of investment activities into social life, involving citizens in financial schemes (Boussard, 2017; Carruthers & Arriovich, 2010) and granting financial institutions a growing influence in domains such as politics, culture or health alike. In this workshop, we would like to discuss the concept of financialization and the impact finance has on governments, firms and individuals.

On the one hand, we shall examine the impacts of financial activities on our societies (Arrighi, 1994; Tregenna, 2009; Godechot, 2012; Lazarus, 2020). What influence does finance have on politics and policy making, for instance in the domains of taxation, housing or welfare? How does financialization transform business, corporate governance and organization of the economic processes (Davis, 2009; Baker & Smith, 1998)? How does financialization influence the distribution of wealth, risks and income? How does finance affect social justice and social equality (Lin & Tobias Neely, 2020)? From the aftermaths of financial crises on households to the inequalities of remuneration within financial institutions, we are interested how finance impacts our lives.

On the other hand, we would like to examine the concept of impact, but backwards, by focusing on a movement of finance that aims at investing in positive social impacts. Sustainable finance denotes practices that link social and environmental justice to financial activities, through authority of state and regulation (Chiapello, 2015; Knoll, 2015, 2019), as well as through action of NGOs (Soule, 2009) or private initiatives, with responsible investments (Sparkes & Cowton, 2004). Today, the actors of this sector claim that the financial sector has a major role to play in the main social challenges of our time, advocating for the spread of social and ecological investments, for instance known as microfinance, ESG investing or impact investing (Barman, 2015; Gregory, 2016; Höchstädter & Scheck, 2015).

For this workshop we welcome contributions from all theoretical and methodological approaches. Our aim is to create a dialogue between research papers that focus on one or both aspects of this proposal. This discussion shall enable us to think about the place and the role of finance in the current issues related to social justice in Switzerland and beyond.

Keywords: financialization, morality and markets, sustainable finance, inequalities

Financing Impact: Are foundations taking the environmental turn?

Anne Monier, ESSEC Business School

Nonprofits are known for their ability to invest in positive social impacts. Impact investing is indeed an important part of investment in the sector (Höchstädter & Scheck, 2015; Schrötgens & Boenigk, 2017, Chiapello & Knoll, 2020). While the financial world is slowly integrating the environmental aspect into their strategies despite the many difficulties (La Monaca, Spector & Kobus, 2020), the nonprofit world seems to be turning a corner on investing in climate change. 

One proof is the new movement emerging in the foundations world. In 2020, several coalitions were created in different European countries by foundations who want to contribute to fight climate change. In the UK, it was the Funders Commitment on Climate Change; in France La coalition française des fondations pour le climat; and in Spain, Fundaciones por el clima. These coalitions try and foster the creation of similar initiatives in other European countries and even worldwide. 

One of the lines of action of these foundations is to change their investments for more sustainable and “green” options. To do so, some foundations have already signed the “Divest- Invest Commitment”, but they are also thinking of new strategies, like convincing their financial advisors to stop financing fossil fuels. 

In this paper, we will focus on this new movement that brings foundations together to change their investment practices. We will analyze the new practices they put into place, the difficulties they face and the way they envision their role in the climate movement, which can be quite important as, despite their quite small financial weight, they are connected to financial and political elites. 

This paper is based on a new beginning research I am conducting on the response of philanthropic actors to the climate crisis. It is based on a qualitative survey, mainly interviews, observations (attending zoom events) and document analysis, at the crossroads between political science, sociology and anthropology. It aims at understanding how European foundations make their ecological transition, try to mobilize others and hope to play a key role in this major global issue. 

Keywords:  Foundations; philanthropy; climate; environment; green finance

Standardizing Care, Caring for Standards: Creation of Evaluation and Disclosure Metrics in ESG Investing.

H. Nazli Azergun, University of Virginia

Incorporating one’s environmental and communal concerns into one’s investment practice goes as far back as 1960s and 1970s. With Responsible Investing (RI) investors sought to screen out certain investment options based on their impact over the environment, e.g., oil and tobacco companies, or over the society, e.g., the South African corporations supporting the apartheid. Further, financial institutions have been crafting accessible tools and venues through which investors can invest responsibly; some examples include Pax World Funds (1971), Domini 400 Social Index (1990), and Dow Jones Sustainability Index (1999). Today, the RI movement has become one of the biggest areas of finance with around $60 trillion worth of assets under management, as of 2019. Within the RI universe, ESG Investing (Environmental, Social, Governance) represents the most recent configuration of embedding various sustainability concerns into financial decision-making; similarly to RI, there are funds and indices that integrate ESG taxonomy, one example being the Standard and Poor’s 500 ESG Index (2019). An ever-increasing demand accompanies ESG’s promising audience: at the global scale, funds holding ESG-integrated assets rose more than 50 percent and passed $1.3 trillion in value, since the beginning of 2020 to its end.

Twinning this increased interest in sustainable investment is a widespread urge to standardize the reporting and evaluation of sustainability data to create a legitimate and efficient market for sustainable investment and to avoid claims of greenwashing. Once again, the tradition runs deep: from Sullivan principles adopted in 1977, which laid out corporate social responsibility requirements, to UN Global Compact 2004, which urged the incorporation of sustainability metrics into corporate practice, to European Union Green Finance Taxonomy that went into effect in 2020, many intergovernmental and non-governmental organizations are working to create standardized reporting and evaluative metrics for corporate sustainability reporting. For instance, in 2020, the five biggest standard setting organizations, International Integrated Reporting Council (IIRC), Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), Climate Disclosure Standards Board (CDSB), and Carbon Disclosure Project (CDP), announced that they would collaborate in creating a globally accepted taxonomy for integrating sustainability concerns into financial decision-making.

In this paper, I argue that these collaborative efforts to create standardized metrics for integrated reporting serve as epistemic alliances, which draw from a plethora of ways of thinking in bridging the divergent registers of valuation denoted by sustainability and shareholder primacy. By merit of negotiating the legibility, accessibility, and the value of assessment criteria for financial decisions (Power 2003), these epistemic (and political) alliances “structure the unknown” (4, Waterman quoted in Weick 1995): They “shape the preferences, organizational routines, and the forms of visibility” (379, Power 2003) around sustainable financial practice, and in doing so they both legitimate the place of sustainability within finance and craft sustainable investing as a “tangible, transferable, and marketable” (290, Shore 2008) asset. Barring the inherent violence entailed by most abstraction and standardization (Carrier 1998; Mirowski 2010; Stevenson 2014; Kirsch 2020), this purposeful move for standardizing ESG reporting promises to become a form of bureaucratic care (Stevenson 2014). This kind of care depends on tinkering with different ways of incorporating sustainability into finance, including models, calculative devices, and narrative framings (Mol 2008). In the end, the potential success of this kind of care depends on its ability to create a new investment tense (Povinelli 2011) that seeks to reconcile the short-termism of shareholder primacy (Fligstein 1995; Ho 2009) and the long-term view of sustainability “hinging on the means of financialization” (359, Tellmann 2020).

Impact investing: a movement of revolutionary insiders?

Noé Kabouche, University of Neuchâtel and Sciences Po - Paris

Impact investing is a financial practice that aims at generating both a social/environmental impact and a financial return. By “investing with a mission”, impact investors affirm that they can use finance in order to make the world a better place and to solve the major problems of our time. Several scholars studied how this movement uses socio-technical devices to measure and value both impact and returns of the investments, how they define social/environmental goals and incorporate them into their processes. Others examined the way impact investors justify their practice and link it to moral approaches regarding the role of capitalism and financial markets. But few works investigate the particularities of the social field in which this movement evolves. Through the case of the impact investing ecosystem in the Geneva region, we show that the main actors of the movement are characterized by a simultaneous belonging to different fields that rely on different logics and ideologies, which forces them to manage the tensions between them. These concurrent fields include especially the traditional financial sphere on the one hand and a more contentious field influenced by logics inherited from NGOs, social movements and international organizations on the other hand. By claiming a revolutionary attitude that would clearly separate from traditional finance and capitalism, and at the same time by refusing to directly confront these entities, the actors of the impact investing movement are located at the junction of territories, which makes them balance their views in order to fit into their complex environment. This research is based on qualitative interviews, ethnographic observations, and statistical analyses on the field of impact investing in the Geneva region.

Keywords: Sustainable finance, impact investing, fields, boundary object

Cash-in Career Capitals. How Elites Convert Experience Within Universal Banks into Positions of Power.

Pedro Araujo & Eric Davoine, University of Fribourg

Over the past decade, scholars working on the careers of business elites have demonstrated an erosion of national models of careers. Although the influence of national contexts on the career of executives remains a reality, notably in the largest states, the phenomenon of globalization had led to the emergence of new institutional configurations. Some studies have shown the increasing importance of international experience among members of executive committees of large firms. In some cases, evidence even shows that the nomination of executives with a strong international profile has a positive outcome in terms of immediate stock market performance. Other scholars have insisted on the increasing importance of having an MBA degree or having a diverse career built on multiple firm and industry experiences. Less attention has been paid to the influence of multinational firms on the career paths of business elite. Recent research suggests that individuals with a career in leading multinational firms can in a specific context “cash-in” their time spent within this company, by converting this experience into a position of power in another corporation. The importance of these multinational firms draws the question of their role as new institutional actors modeling the career of business elites.

As a field that has undergone an unprecedented internationalization, the Swiss financial sector is an interesting case for the study of the influence of leading multinational firms on the careers of business elites. The leading pair of Swiss banks, UBS and Credit Suisse, are among the fastest-growing universal banks in the world. We argue that the new weight of universal banks is not without consequences on the careers of Swiss banking elites. Building on Bourdieu’s concept of capitals and its extensions in recent literature, we propose to analyze how future top bankers build their social, cultural and symbolic capitals by mobilizing an extended professional experience within a leading universal bank. In order to do so, we rely on a database of 223 executive directors from 37 Swiss banks and 10 interviews with HR directors. First, we demonstrate, through a sequence analysis, that a professional phase within a universal bank is seen in a significant number of executives of each type of bank, whether they have a local or international area of activity. Secondly, we show, through the analysis of interviews, what the capitals acquired within universal banks mean for recruiters and how they are valued in the selection of new executives. This contribution adds evidence that universal banks play a central role in the fabric of national and international banking elites, and bring new norms and standards in business elite profiles.