Insights from: Mary Margrarent Frank, Pedro Matos, and Aaron Fernstrom

Written by: Dave Hendrick

Newswise — Socially responsible investing is both increasingly popular and poorly defined.

Driven by a confluence of factors, notably demands of socially minded investors and stakeholder-aware corporate leaders, investments that incorporate environmental, social and governance (ESG) concerns have skyrocketed in recent years.

According to a recent technical note written by University of Virginia Darden School of Business Professor Mary Margaret Frank, socially responsible investing accounted for about $2.71 trillion in assets under management in 2007. Seven years later, the value had risen to $21 trillion and has continued to grow since, with about $12 trillion under management in the United States alone, as of the end of 2018.


Despite the wave of interest and widespread sense that the movement will continue to grow as monied millennials prioritize social mission in their investing choices, the concept of socially responsible investing is a nebulous one, meaning different things to different audiences.

“I call it the wild, wild west of finance. We don’t really know what to call it,” Darden Professor Mary Margaret Frank said. “You need to make sure when you talk to people that you ask them what they are talking about, because everybody in this space uses different definitions.”

Common terms rolled up under the umbrella of socially responsible investing and ESG can include: blended finance, ethical investing, green finance, impact investing, sustainable investing and triple bottom line.

Similarly, the way credit agencies treat the space and disclosures are “all over the place,” Frank said.


Frank also cautions about assuming the millennial investment choices will remain static over time, noting that the priorities of the Baby Boomer generation at 23 to 38 years old — when many were termed “hippies” — often changed dramatically as they aged.

“One thing you have to think about is: Is this a sustainable phenomenon?” Frank said. “If this is only driven by young adults, will it sustain when they have pressures like putting children through college?”

And as the industry grows in popularity, Frank said to watch the actors who may seek to take advantage of the sentiments around the movement, likening the situation to the bootleggers who took advantage of prohibition.

“One of the things I caution against in ESG is this notion that everyone has this wonderful intent to invest well,” Frank said. “As this attracts attention, one question will be: Do you recognize the bootleggers who are coming in from behind to take advantage of the situation?” 


While the U.S. has the most funds domiciled, the percentage of ESG investments is higher in Europe, Canada and Australia.

Emerging research from Professor Pedro Matos and Darden’s Richard A. Mayo Center for Asset Management is seeking to understand how global capital flows are impacting ESG investments. Just as the rise of U.S. money flowing into global equities has been shown to be a largely positive force for governance and the performance of long-term investing, does money flowing out of Europe help spread labor and environmental practices consistent with ESG investing? 

Matos noted the work of Principles for Responsible Investment, a United Nations-backed effort to direct capital to address goals pertaining to social investing practices, notably asking its international network of investing institutions to sign a pledge to be “active owners and incorporate ESG issues into our ownership policies and practices.”

The group has seen pledges from 2,000 signees, representing $80 trillion in assets under management. More than 900 signatories are based in Europe, with 415 in the U.S. 

Matos explores how institutions that have signed the pledge “are coordinating themselves to engage with companies,” and this research suggests there may be “some evidence of success and impact when they do so.”

About Mary Margaret Frank 

Frank’s expertise is in the integration of business and public policy, including cross-sector collaborations. She is a former board member of the Female Health Company, which works with public-private partnerships that empower women to fight HIV globally, especially in Africa.

Her additional expertise is in regulated disclosure focusing on tax, financial accounting and patent reporting. Her most recent research examines international tax settings. More broadly, her research focuses on the effects of regulated disclosure on corporate management, investors and entrepreneurs.

Frank practiced as a CPA and worked for Arthur Andersen in Washington, D.C., as a senior tax consultant. She served on the board of directors and chair of the Audit Committee of Veru Inc., formerly known as the Female Health Company. She wrote “The Potential for Inflating Earnings Through the Expected Rate of Return on Defined Benefit Pension Plan Assets” with Brian Adams and Tod Perry in Accounting Horizons.

Frank was awarded the 2014 Aspen Institute Faculty Pioneer Award for her innovative work teaching business school graduates how government and business can work together to solve problems and create opportunities.

B.S., M.Acc., Ph.D., University of North Carolina at Chapel Hill

About Pedro Matos

Matos is an expert in the fields of asset management, investments, corporate governance and international finance. His research focuses on international corporate governance and the growing importance of institutional investors in financial markets worldwide.

Before Darden, Matos served as an economist for the Portuguese Ministry of Finance and as a consultant for the World Bank in Washington, D.C., and taught at the University of Southern California. He is a research associate at the European Corporate Governance Institute.

Matos is one of the authors of “Are US CEOs Paid More? New International Evidence,” published in February of 2013 in The Review of Financial Studies.

B.A., Universidade Nova de Lisboa; M.S., IST Universidade Tecnica de Lisboa and INSEAD; Ph.D., INSEAD

About the University of Virginia Darden School of Business

The University of Virginia Darden School of Business delivers the world’s best business education experience to prepare entrepreneurial, global and responsible leaders through its MBA, Ph.D. and Executive Education programs. Darden’s top-ranked faculty is renowned for teaching excellence and advances practical business knowledge through research. Darden was established in 1955 at the University of Virginia, a top public university founded by Thomas Jefferson in 1819 in Charlottesville, Virginia.