How do financial sector organizations differ in their lobbying resources and methods depending on different firm, institutional and Corporate Social Responsibility (CSR) factors?

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How do financial sector organizations differ in their lobbying resources and methods depending on different firm, institutional and Corporate Social Responsibility (CSR) factors?

Master thesis, January 2019

Leiden University

Faculty of Governance and Global Affairs

Author: Emma de Leeuw

First Reader: Dr. Caelesta Braun Second Reader:

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Abstract

The Paris agreement signed in 2015, is a major step towards setting climate change targets. Efforts across industries need to be made to achieve the goals of the Paris agreement. The financial industry will play an important role in facilitating the shift towards a more sustainable economic system. Various financial organizations are already incorporating sustainable

initiatives into their operations through Socially Responsible Investing (SRI) and acknowledging their Corporate Social Responsibility (CSR). Do organizations with good SRI and CSR mandates also promote these ideals within the European financial regulatory lobbying environment? The EU has initiated the implementation of regulations relating to sustainable finance. Through a regression analysis, the lobbying resources, political participation and consultation responses of the different financial organizations are measured. While the differing levels of SRI commitment is the main explanatory variable, other firm specific and institutional factors are also included in the analysis. In general, the SRI commitment of an organization does not significantly influence lobbying resources or methods. Institutional factors and firm specific factors only had a marginal influence. This conclusion emphasizes the complex factors unique to each organization that influence the financial regulatory lobbying environment.

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Introduction & Research Question

Banks and financial organizations have an impact on the economy by determining where credit is invested.1 The majority of the financial organizations involved in lobbying a certain regulation have a significant interest in the proposed changes.2 Therefore, financial organizations use

lobbying as a tool to influence the policy-making process. Especially within the European Union, the financial industry can influence financial regulation through various means of interacting with the different EU institutions.3 Nevertheless, lobbying methods and processes differ between political and economic jurisdictions, and differ within them.4

Socially responsible investing (SRI) has been expanding from a niche market position into the main business strategies of financial organizations. Part of the increasing popularity is from the demands of customers and government legislation. However, there is still a lot of debate about the profitability of SRI funds. Rather than shifting towards full SRI allocation, the majority of banks have emphasized the focus on their CSR activities. While it is positive that CSR is

considered, it is often part of a bank’s marketing department. Thus, the question is whether banks with high levels of CSR/SRI commitment reflect these positive ideals in their attempts to

influence financial regulation. In short, are their mandates consistent with their lobbying responses? Alternatively, are the CSR/SRI commitments only a window dressing to attract customers and bolster their reputation?

The focus on SRI banks is relevant due to the increase in the demand of SRI based financial products and the supply of them and their potential to have a positive lasting impact on many of the world’s future problems.5

Environmental, social and governance (ESG) metrics can provide long-term insight into future financial performance of investments; providing earlier warning signs of financial system stress within and among industries.6 The 2015 Paris agreement on climate change and the United Nations (UN) 2030 Agenda for Sustainable Development are multi-industry plans for a sustainable future. The EU has acknowledged the necessary

involvement of private sector investments to achieve climate and energy targets by 2030.7 This has led to the EU institutions focusing on the role of businesses within the modern economy combined with concepts such as the circular economy.8

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The European Commission (EC) conducted a number of studies to understand CSR

considerations, firm specific motivations and what type of regulations are better at promoting CSR and achieving EU goals.9 While understanding and measuring the true impact of CSR is difficult, the report concluded that companies found CSR to be an integral part of business. The main reasons businesses pursue CSR is to gain a competitive advantage or because of civil society/ media pressure.10 The study concluded that there is a weak link between mandatory EU policy on CSR, and a company’s CSR strategies.11

Therefore, if CSR practices are not directly motivated because of regulation, is there a possibility of a ‘California effect’ taking place; where CSR successful companies push for increased CSR policies?

The EU has acknowledged the role of the financial industry to resolve some of the future global problems, including climate change and an unstable financial system.12 Various sustainable finance regulatory reforms that include standardized reporting and increased transparency are currently ongoing.13 Since there is a significant amount of potential for the financial industry to have a positive impact, understanding if there is a difference between SRI focused financial organizations’ and non-SRI organizations’ responses to these regulations can provide insight into how to best transition into the sustainable financing of economies.

While financial organizations have become more conscious on their efforts to improve CSR considerations within the operations and asset allocation, there has also been a degree of

frustration.14 Part of the frustration stems from lack of standardized requirements used to assess different types of financial organizations and asset classes. Therefore, while the intentions are there, there is a lack of implementation due to weak regulatory guidance. Since the 2015 Paris agreement on climate change and the United Nations (UN) 2030 Agenda for Sustainable Development, the EU has begun to implement an agenda of initiatives related to sustainable finance. The package of initiatives related to sustainable finance is one of various aimed at achieving climate objectives.15 The five regulations relate to initiatives for transparency, standardized regulatory and reporting frameworks to promote the financing of sustainable and inclusive growth and stability.16

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This paper addresses the impact of differing levels of SRI/CSR concepts on lobbying resources and methods employed at the European level. Understanding the extent to which SRI/CSR mandates, institutional and firm specific factors impact lobbying resources and methods is the goal of this research. This paper hopes to understand whether SRI organizations promote their CSR mandates in the political sphere or whether the positive framing efforts are only marketing tools. This research focuses on a specific relationship; it will focus on two dependent variables: lobbying resources and consultation responses. Additional institutional and firm specific

variables measure whether the dependent variables are the result of other independent variables. The explanatory variable, SRI levels is on a fuzz set basis. Medium and high SRI level banks are those that market themselves as an SRI organization and whether the bank is a member of the European Sustainable Investment Forum (Eurosif) or the national equivalent. The EC’s transparency register provide the dependent variable of political participation, while the sustainable finance consultation responses submitted by organizations measure the lobbying methods and responses. An important assumption is that banks with high levels of SRI will also have robust CSR policy and engagement.

A theoretical framework below guides the research and hypotheses. The research design explains the operationalization, followed by the results and analysis, shortcomings and policy

implications. To hypothesize properly, it is first necessary to understand the context of lobbying EU institutions from the perspective of the financial industry. While the relevance of CSR and lobbying is clear, do the mandates of the organizations translate into the political sphere?

Theoretical Framework

Financial Industry Lobbying Context

The theoretical framework describes the current lobbying environment of financial regulations. Next, institutional and firm specific factors that influence the lobbying activities of financial organizations are discussed. Lastly, CSR an SRI are the as new factors that are analyzed in relation to financial regulatory lobbying. Understanding the wider financial industry-lobbying context is important in order to recognize and predict different lobbying methods employed by banks. Accordingly, consideration of external and internal motivating factors that influence

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financial organizations’ behavior is important.17

Some of the major themes related to financial lobbying include regulatory capture, public salience, actor plurality and EU political structure.

The financial crisis in 2008 served as a structural break towards a more nuanced financial lobbying strategy. The changes caused by the financial crisis highlight the complex financial regulatory environment. The financial crisis increased public salience surrounding financial regulations. This public salience broadened the scope of stakeholders that feel impacted and gave more power to regulators to avoid another financial crisis.

The lenient capital requirements under the Basel Committee on Banking Supervision (BCBS) Basel II accord (pre-crisis) has often been believed to be the result of financial industry

lobbying.18 Regulatory capture is the consistent and systematic private sector influence leading to weakened regulatory standards.19 Through a network of actors, private sector influence includes formal and informal lobbying efforts.20 Regulatory capture occurs due to institutional factors such as information asymmetry caused by increasing financial complexity,

self-regulation, deregulation and private consultation processes.21 Proving whether regulatory capture occurs is difficult, as many of the interactions between regulators and the regulated are not public.

The successful regulatory capture by the financial sector occurred only on some aspects of the Basel II accord.22 This demonstrates that even with the interdependency and shared norms between the regulated and regulator, regulatory capture does not always occur.23 Transnational financial regulations are less susceptible to capture due to the lack of information asymmetry, which provides regulators with more room to pick and mold regulations. The decrease in regulatory capture is evident in financial organizations’ shift from aggressive lobbying

techniques towards a more cooperative lobbying approach.24 The increase in public salience of financial regulation has motivated industry associations to publish their own commitments as a way to set the agenda, but also to boost credibility by demonstrating a willingness to change.25 Furthermore, rather than blocking regulations outright, financial organizations now lobby delaying the implementation of Basel III regulations.26 Hence, research on the post-crisis

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financial lobbying context should focus on regulatory processes and interactions rather than just the content.27

Another result of the financial crisis was the increase in awareness of financial regulation. The financial industry has been argued to have one of the highest proportion of non-target groups responding to consultations.28 Whether a non-target group mobilizes within the financial industry is dependent on the group’s members, where the costs are concentrated, the level of public

salience and the lobbying structure.29 Collaboration between the financial industry and non-target groups can expand the financial industry’s lobbying efforts at different stages of the policy making process and can assure regulators of widespread support for a particular stance.30 This collaboration is mainly around discrete issue areas, through coordinating lobbying positions and strategies.31 However, this plurality can also result in non-target group mobilization against the financial industry’s stance, decreasing their influence and credibility.32

The varied influence of actor plurality emphasizes the complex lobbying environment in which financial organizations operate. With the increase in public salience for financial regulation (quiet politics to high politics); original stakeholders (financial organizations) lose influence and have to collaborate with other stakeholder groups.33 Increasing public salience has resulted in growing actor plurality within the financial policy making process.

In contrast, actor plurality in the financial sector has been rejected; instead, there has been the continued status quo.34 Actor plurality has not occurred due to the diffuse costs of financial regulation and the lack of specialized knowledge by non-target groups. This created an

institutional structure facilitating banks and industry associations` privileged access to financial regulators.35 Additionally, the recession increased regulators’ power to avoid another financial crisis. Even without actor plurality at the EU level, financial organizations do not have full control over regulators. Within EU hedge fund regulation, few stakeholders shifted the national preferences at the EU regardless of the large amount of opposition.36 The government protects sectors that have developed comparative advantages. This re-affirms the status quo of the most influential financial systems leading the international financial regulatory environment.37

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The institutional factors may have a positive correlation with the lobbying resources present at the EU level through number of people involved. Additionally, countries with higher resources and regulatory impact will pursue additional political participation because of their increased expertise and influence of the market. This leads to the first hypothesis that tests whether more resources available also translates into higher lobbying resources.

EU-TR: Hypothesis 1: Countries with higher resources (overall and policy-specific) will have higher lobbying expenditure and participation.

GDP, numbers of monetary financial institutions (MFIs) and financial city worldwide rank represent the institutional factors. These factors represent total resources of a country and its relative financial position worldwide.

The regulations analyzed are proposals put forth by the EU; therefore, it is important to

understand the financial regulatory environment of the EU. The unique lobbying structure of the EU is important. Below is a diagram of the many avenues in which financial organizations can lobby the different EU institutions. The sustainable finance proposals had a public consultation period; this will be the main source of analysis. A technical expert group on sustainable finance assists with the development of the regulations and is another lobbying channel. Members of this group are from a variety of industries. The scope of this analysis focuses mainly on the direct lobbying channel of the EC. However, other branches of EU institutions, mainly the stakeholder groups provide a parallel channel for organizations to influence the regulatory proposals. Due to the scope of this research, these parallel institutions are not analyzed, but should be considered for further research.

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Figure 138: Institutions involved in EU Financial Regulation and ways of lobbying them

The financial crisis in 2008 marked a shift in the financial regulatory environment towards a more cooperative lobbying approach due to increased public salience and actor plurality.

Financial organizations respond to the lobbying environment in which they operate, influencing their lobbying activities. In addition to the external factors, all organizations have underlying motivations that steer their behavior. These internal motivating factors are discussed next, along with the corporate political activities organizations engage in.

Corporate Political Activity (CPA)

The growing political influence of organizations motivates understanding how they attempt to influence the political process. Corporate political activity (CPA) or more commonly referred to as lobbying is “any communication process between individuals representing the firm interest and policy-makers, stimulated by a firm with the intent to influence policy-making.”39 CPA consists of activities that attempt to influence political institutions to benefit an organization. In this research, the self-reported number of people involved in lobbying EU institutions and additional political participation represent CPA as the dependent variable. This information is from the EU’s Transparency Register.

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Organizations respond to policy formation due to internal and external factors.40 Both factors influence an organization’s social position and political activity.41

A business is likely to become politically active if they predict economic benefits of political activity; in contrast, organizations are inactive if the costs are too high or if the policy formation is certain.42 Consideration of financial organizations’ motivations allow for better interpretation of why specific organizations lobby. There are two main theories behind lobbying motivations; these include the political science and economic perspectives.

The political science perspective argues that the institutional factors create a pluralistic lobbying environment, thus offsetting any overbearing influence of one interest group.43 Non-market strategies are attempts by organizations to use the social, political and legal conditions to promote their interests.44 Collaboration with non-market actors are done to obtain legitimacy through wide stakeholder support and to control resources to maintain competitive advantages.45 Some of these methods include Annual General Meetings (AGMs), lawsuits, media coverage, and private negotiations. In relation to the sustainable finance regulations, non-market groups can motivate organizations to pursue more CSR activities through direct CPA. These strategies employed by organizations are not measured in this research. Nevertheless, this is an alternative explanation for the different levels of lobbying resources employed by organizations.

Rather, the firm level motivations are analyzed to understand their impact on the lobbying resources registered in the EU transparency register. Economic theories46 explain that organizations lobby because of competition between actors for scarce resources. To avoid

significant costs, organizations will lobby; their method (internal/external lobbyist) dependent on the costs.47 If organizations are more impacted by potential regulation it attempts to influence the policy making process. This leads to the second hypothesis surrounding the firm specific factors that motivate lobbying resources.

EU-TR: Hypothesis 2: Larger organizations with more regulatory exposure and resources will have higher lobbying expenditure and political participation.

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Whether the bank is a systemically important bank (OSII/GSIB), bank, association, level of regulatory interest, and the lobbying type represent the firm specific variables.

The two groups of institutional and firm specific factors are applied to the dependent variable of CPA resources. Due to the nature of data availability and lobbying, only the self-reported, public resources base this research. This may skew the results and narrows the potential research

population.

Below is a list of institutional and firm specific factors that influence a financial organization’s decision to use resources to influence the financial lobbying environment:

Subject Description

Potential for capture

Capture can occur due to institutional factors such as information asymmetry caused by increasing financial complexity, self-regulation, deregulatory efficiency and private consultation processes.

Actor plurality Based on the number of perceived stakeholders. This either can result in successful collaboration with shared perspectives or can result in a clash of opinions.

EU member Interest groups in EU have access to multiple means of influencing EU regulation. (EP, EU Commissioners, ministers). Non-EU countries cannot directly influence EU; they compensate along national lines.

Country resources A wealthier country with more resources available throughout various industries has multiple levers of pushing for their interests. This includes absolute resources, but also industry specific resources within a country.

Level of gov’t involvement / Exposure

Regulation, subsidies or procurement, as the government involvement in an organization increases, so does direct lobbying.

Size of company In regards to non-EU organizations lobbying in EU, more likely to have large organizations due to the necessity of direct lobbying techniques. The size of the organizations will have influence on the level of interest.

Table 148: Factors that influence an organization’s direct lobbying strategy on the EU

Framing

CPA measures any organization’s general lobbying behavior, while direct lobbying responses and framing techniques represent political activity once the policy process has already begun. The responses of organizations towards the sustainable finance regulatory proposals are the

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source for the framing methods employed by organizations. Firstly, different types of responses, and then the framing methods are defined.

The financial regulatory environment described above includes external factors that affect the type of CPA an organization chooses to employ. The lobbying environment determines an organization’s political position and potential success of influencing the regulatory environment. Regulatory specific factors are other external factors that influence an organization’s response. In addition to the regulatory environment and the regulation’s structure itself, firm, industry and institutional factors influence an organizations’ response towards regulations.49

Below are four different types of business responses:

• Defensive: Protect the status quo; openly reject and lobby against proposed regulation. • Reactive: Respond to regulation after finalization; do not try to influence regulation.

• Proactive: See competitive advantage opportunity with changing regulatory setting. There is a realization of a social problem and have economic interests to promote broader social benefits. • Anticipatory: High costs of collaboration, regulation as inevitable try to respond strategically

Figure 250: Types of Sociopolitical Business Responses to Mandatory Regulation

This leads to the first hypothesis regarding organizations’ different responses to the proposed mandatory sustainable finance regulations. High/medium SRI organizations by nature of their organizations voice a positive stance towards the sustainable finance regulations. However, whether they are politically active to promote these goals is the main question of this research. While high/medium SRI organizations lead the industry in knowledge, they might want to keep

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their niche position and respond less enthusiastically. Additionally, do high/medium SRI organizations self-impose regulation for the sake of promoting their mandate?

EU-SF: Hypothesis 1: The proposed mandatory EU sustainable finance regulations will most likely see the following responses

- high/medium SRI organizations: proactive - low/non-SRI: anticipatory or reactive

Along with different response types, another technique financial organizations use to influence the regulatory process are framing techniques to influence the direction of the regulatory process. Framing strategically highlights certain parts of policy proposals in order to shape the policy discourse.51 Interest groups employ two different framing methods when attempting to influence EU institutions. The first method is through equivalency (valence) which emphasizes

information within the proposal and casts it in either a positive or a negative light.52 Taking it further, the issue (emphasis) frame adds potentially relevant information to steer the policy discourse.53

In addition to the different framing methods organizations employ, it is important to understand what Baumgartner et al. describe as the two faces of framing: individual lobbying efforts and exogenous events, which when combined results in the final collective issue definition.54 Individual lobbyists often maintain a single-issue frame, in order to ensure their perspective appears legitimate and genuine.55 The second face of framing; the collective issue definition is more relevant to policy makers. The long-term development of issue perception is another factor that influences the success of framing efforts. The institutional context influences the long-term development of issue perception. In order to hold the political actors accountable, such

institutional context is important. How the public perceives certain issues is a major factor for the political actors, in turn also for organizations.56 These two influential factors can assist in

determining what framing strategies will be more popular. While the collective issue definition is important, it is hard to measure. Therefore, the individual lobbying efforts and the frames

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An actor’s organizational type influences the framing method chosen. Associations are organizations that rely on its members for resources and thus have to consider the members’ interests. Sectional associations employ an economic frame to defend the economic interests of its members; cause group associations employ a public frame due to the wide scope of their members.57 In contrast, organizations are not constrained by membership preferences but depend on their profitability on the market, thus employing business frames.58 The membership

conditions are most important in determining an interest group’s flexibility of framing methods. The most flexible are firms, followed by sectional associations and lastly cause groups.59

Organizations with higher levels of CSR/SRI interact with a broader scope of stakeholders. Increased public salience about the integration of the financial sector within the wider economy broadens the scope of stakeholders. The increasing focus on public salience and actor plurality has transformed the lobbying environment and organizations’ lobbying methods. Organizations with medium/high levels of SRI will situate the sustainable finance regulations beyond the financial industry. Meanwhile organizations with lower SRI levels will relate to the regulations in terms of the financial industry and the current costs associated.

EU-SF: Hypothesis 2: SRI focused banks more often employ public frames, while non-SRI banks focus more on economic/business frames.

The increased public salience and actor plurality are topics that drive CSR and SRI promotion. The rise of SRI banks can serve as an example of these changes occurring in the financial

industry. Classifying and comparing banks according to different levels of CSR/SRI can serve as a proxy for the influence of actor plurality on financial lobbying methods and frames. Through increased shareholder engagement, SRI banks can encourage the companies they invest in to improve CSR commitments. Thus, understanding the different lobbying and framing methods between CSR/SRI focused and traditional banks can provide insight into the relation between CSR/SRI and the role of actor plurality in the EU lobbying regime. Next, are the concepts behind the explanatory variable of CSR/SRI and its relation to lobbying.

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Corporate Social Responsibility (CSR)

A financial organization’s commitment level to SRI/ CSR commitment is a new factor to

measure when analyzing organizations’ lobbying resources and framing methods. The increasing political influence of the financial industry has occurred due to globalization and self-regulation. As CSR and SRI focused financing grows, the political influence of diverse and contrasting stakeholder interests also grow.60 Researching the impact of SRI/ CSR provides insight into the interaction between organizations with broader stakeholder considerations and the regulatory process. Within the EU focus on sustainable finance, CSR has a role in promoting positive change and increased accountability within companies.61

The idea of CSR began in the 1950s and focused on the achievement of societal aims. By the 1990s, CSR theories focused on the interdependent political and economic factors that shape the economy. Theresa Bauer wrote an extensive book on responsible lobbying, which combines CSR and lobbying theories. Broadly speaking, “CSR is understood as an umbrella term that refers to the responsibility of organizations to consider the societal good in a long-term perspective.”62 The corporate aspect refers to the organization as an entity with its own internal organization, social refers to the organization operating within a wider constantly changing societal context. Responsibility relates to an organization’s past and future obligations to society.63

This broad definition is from Archie Carroll’s CSR pyramid where corporate responsibilities intertwine within a company’s simultaneous pursuit of economic, legal, ethical and philanthropic

responsibilities.64 Often, CSR is depicted as being voluntarily motivated and CSR actions going “beyond obeying the law”.65

However, the underlying principles are increasingly influencing regulatory standards, even though the majority of governments do not legally mandate them.

A big part of CSR theories refers to the stakeholder theory where various stakeholders are able to influence an organization’s actions depending on their relation to the organization and the

urgency of their claims. Stakeholder theory has become a major theory used within CSR literature. Phillips states that an organization’s legitimacy comes from two relevant stakeholder groups. The direct moral obligation to promote CSR initiatives (employees, customers, suppliers) is normative legitimacy. Derivative legitimacy relates to the profit driven motives not linked to any moral obligations.66 Both groups attempt to influence an organization’s actions based on

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their own interests; either through asymmetric or symmetric two-way communication.67 An example analysis would be the EC IMPACT study on CSR concluding that labour market stakeholders had the largest impact of pressing for CSR activities but less influence in the actual diffusion of CSR within a company.68 The growing influence of various stakeholders is a major focus of literature that analyzes CPA and regulatory responses employed by the EU financial industry and responsible lobbying.

Responsible Lobbying

Heightened awareness for the long-term impact of corporate actions on society while influencing political regulation results in responsible lobbying. Slob and Weyzig originally defined the term: responsible lobbying is “lobbying consistent with the CSR policies and commitments espoused by the company.”69

When an organization pursues responsible lobbying through the

incorporation of its CSR mandate on its lobbying efforts, it is also trying to gain credibility, trust, and legitimacy. Responsible lobbying increases an organization’s political influence by making its’ policy perspectives compatible for policy makers to adhere to.70

Responsible lobbying results in the perception of organizations as morally legitimate actors within the lobbying process, while achieving their interests. In the context of this research, responsible lobbying occurs when the financial organization’s response in the consultation document shows support for the sustainable finance regulations.

Socially Responsible Investing (SRI)

While companies from all industries have developed and implemented CSR mandates, the focus of this paper is on the financial sector. Since the direct impact of financial organizations’

activities on society is hard to measure, their socially responsible investment (SRI) activities along with CSR mandates are a good indicator of their societal impact. There is a distinction between CSR and SRI: CSR relates to the ethical, environmental and governance activities of an organization, SRI investors account for CSR considerations when making investment

decisions.71 If the financial organization pursues socially responsible investing (SRI), or is in an association representing SRI then it is a medium/high level SRI organization. This is the

explanatory variable when explaining variances in lobbying resources, responses and framing methods.

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There has been a steady uptake in the demand of SRI based financial products and the number of banks supplying them.72 As can be seen in the table below, SRI assets in all regions of the world have experienced growth. While the European region’s growth rate has slowed down, it still accounts for the largest share of SRI investments. The political power of the financial industry combined with the uptake in SRI investing can be a driving force towards a more sustainable society.

Table 273: Growth of SRI Assets by Region 2014-2016

The differences between SRI uptake among countries is due to the differences in the emphasis of vertical collectivism or horizontal individualism. Countries that emphasize horizontal

individualism have social consciousness woven into their history and have more freedom to commit to long-term positive investment.74 Additional country specific institutional, social and economic factors influence the uptake of SRI based funds. Economic openness supports wider SRI acceptance.75 SRI asset allocation largely mirrors the composition of a country’s financial sector; large pension funds have the most beneficial impact on SRI, potentially due to their long term, value based focus.76 Cultural factors influence a nation’s institutional acceptance of SRI. Countries with values that are more feminine and those that emphasize uncertainty avoidance directly promote preferences of CSR factors within their investments.77 Below is a diagram that summarizes the additional economic and social factors that influence SRI activities in Nordic countries where SRI is widely practiced.

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Figure 378: Relation between economics, finance, culture and institutions with SRI

Another factor influencing the uptake in SRI within banks is the changing SRI methodologies. Originally, ethical investing meant excluding “negative” industries, SRI methods have moved towards measuring the holistic impact of individual companies without excluding whole industries.79 The ramifications for the shift towards different SRI methodologies and the real impact on the economy are beyond the scope of this paper. Other factors such as mandatory legislation for institutional investors and greater stakeholder demand for SRI has resulted in particular in the growth of SRI strategies among pension funds.80 The growth in SRI strategies is not only limited to pension funds; SRI has expanded in the majority of financial products.81

While there is SRI expansion, since the introduction of SRI, the impact on profitability has always been debated.82 It has been proven that in the long-term SRI focused funds performed better than non-SRI organizations, particularly in the US and Europe.83 In addition to long-term profitability, corporate change of invested companies is another goal of SRI investors.84 This uptake has evolved the practice of SRI investors to account for the invested company's CSR commitments.85 This evolution has seen the increasing influence of shareholders and their changing demands. The growing group of stakeholders with the potential to voice their opinions has influenced the internal decisions of financial organizations, and external lobbying and framing methods.

This increased awareness among shareholders of SRI funds has the potential for shareholders to push corporate behavior within the invested companies to improve their CSR activities.86 This

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highlights the relevance of the financial industry as a way to promote CSR activities within organizations.87 This push often occurs at companies’ Annual General Meetings (AGM) where a dialogue is established with corporate actors.88 Thus, the most significant impact of SRI on CSR activities may not necessarily be through the governmental/ regulatory route. Rather the relation between SRI funds and the individual companies may be more informative regarding the

effectiveness of SRI motivating CSR activities. The expansion of SRI funds into the mainstream, along with a growth in mandatory legislative requirements for institutional investors has resulted in heightened shareholder activism to push for CSR developments.89 Despite the importance of understanding the effectiveness of SRI on influencing positive change through CSR, that is beyond the scope of this paper.

Despite the growth of SRI and increased CSR consideration within invested companies, there is a large disparity between financial and banking organizations scores on Environmental Social Governance (ESG) metrics.90 A reason for this disparity and low score is the lack of standardized metrics among the majority of banks.91 The lack of standards is a fundamental problem if SRI banks are supposed to monitor the companies they invest in.92 Increased CSR standards and transparency could restore a financial organization’s credibility with the public.93

Below are some examples of banking and financial sector organizations and the CSR initiatives

implemented. The variety in CSR initiatives demonstrates the difficulty in producing a standard metric and accompanying scale.

Organization Sector CSR/SRI Focus

Australia and New Zealand Banking Group (ANZ)

Banking Sector Use of social and environmental screening tools for credit assessment. Actively finances renewables and emissions trading.

Itau Unibanco Holdings SA Banking Sector Focus on stakeholder relationships and human capital to monitor sustainable management of all divisions.

Swiss Re Insurance Sector Serves emerging and less developed markets, using its expertise to analyze its CSR risk.

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Organization Sector CSR/SRI Focus

UBS AG Banking Sector Top-down CSR approach, values based initiative, and follows up with SRI companies to ensure ESG values adhered to. Major efforts to tackle financial crime.

Co-Operative Banking Group (CBG)

Banking Sector Focuses on CSR and SRI activities in 6 areas. Transparency of business practices and open consultation processes to influence them. Table 394: Examples of financial industry organizations with good CSR practices

Below is a diagram that explains the hypothesized chain of association.

Figure 4: Outline of hypothesized chain of association

In the diagram above, various industry and institutional factors influence the dependent variables of corporate political activity and consultation responses. There is a positive correlation between CSR and SRI, which are the explanatory variables. Corporate Social Responsibility (CSR) represents the differing factor between SRI and non-SRI banks. Higher CSR activities increase the responsiveness of organizations to their stakeholders and societal concerns and results in a proactive consultation response with the use of a public frame. There are extensive sources that analyze the financial regulatory environment, corporate political activity and framing techniques. This research hopes to combine these three topics together with socially responsible investing and corporate social responsibility. It hopes to make an objective analysis at whether there is a translation of SRI/CSR mandates into lobbying practices.

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Hypotheses

How do financial sector organizations differ in their lobbying resources and methods depending on different firm, institutional and Corporate Social Responsibility (CSR) factors?

The above theories led to the development of the following hypotheses related to the question:

Hypothesis Related Theories &

Concepts

EU-TR: H1

Institutional specific: Countries with higher resources

(overall and policy-specific) will have higher lobbying expenditure and participation.

Organized interests (Hangraaff, Braun, de Bièvre, Beyers) EU-TR:

H2

Firm specific: Larger organizations with more regulatory

exposure and resources will have higher lobbying expenditure and participation.

Corporate political activity

EU-SF: H1

Firm specific: The proposed mandatory EU sustainable

finance regulations will most likely see the following responses

- SRI organizations: proactive - non-SRI: anticipatory or reactive

Kim & Darnall: types of responses to mandatory regulation

EU-SF: H2

Firm specific: SRI focused banks more often employ public

frames, while non-SRI banks focus more on economic/business frames Kluver: types of frames Table 4: Hypotheses

Research Design

Goal

This research will explain lobbying behaviors used by financial sector organizations within the EU policymaking process. The level of analysis will be on the EU financial regulatory level. The explanation provided by this research will be prospective as it focuses on the effects of causes; how and what factors cause financial organizations to pursue differing levels and types of lobbying methods. The number of people and additional political participation registered by

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organizations in the EU Transparency Register measures the general CPA resources. The financial organizations’ documents submitted during the sustainable finance regulations consultation period measure the responses and framing methods between organizations.

Population

There are two populations of financial institutions; each represents a separate regression with different dependent variables but the same explanatory and independent control variables. The first regression analysis (TR) looks at which factors influence the lobbying expenditure and political participation. The second regression analysis looks at which factors influence the

organizations’ responses during the consultation (SF). It is hypothesized that the outcome will be a sufficient condition where the outcome of particular lobbying method occurs with increased CSR/SRI, but is not necessarily absent without the increased CSR/SRI commitment.

1) Transparency Register (TR): from the full EU transparency register, the organizations that listed finance or banking as an interest.

2) Sustainable Finance Regulations (SF): organizations that responded during the consultation period of the six regulations related to sustainable finance.

The first regression analyzes general trends in corporate political activitiy and the impact of institutional and firm factors on resources expended. These both only measure the direct and public lobbying by financial organizations, not the private interactions or the non-market strategies. Therefore, there is potential for a lack of significant results, since some of these alternative resources employed by organizations are not measured. The second regression is a more in-depth and focused analysis on the different types of responses and frames used by financial organizations to influence the sustainable finance regulatory process. The regulations are described below.

Sustainable Finance Regulations

The EU has released an impact assessment of the progress made on sustainable finance and a set of five regulations targeting different sectors of the financial industry. The EU introduced these regulations in the spring of 2018 and held a consultation period during the summer of 2018 by

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private citizens, interest groups and private companies to provide their opinion and suggestions. The types of actors to respond varied which supports the argument of actor plurality within the financial regulatory environment. The answers of the different organizations represent their different lobbying stances. Below is a list of the financial regulations analyzed. These

regulations are very recent and provide insight into the early responses of organizations towards the proposals. Analyzing these regulations is a valid way to tell whether SRI focused

organizations have similar political perspectives as their CSR/SRI mandates.

1. Institutional investors’ and asset managers’ duties regarding sustainability

This impact assessment outlines previous progress made by EU regulations related to the duties and responsibilities of institutional investors. Additional responsibilities introduced by the five regulations below outline requirements, benchmarks, disclosures and a general framework to assist financial organizations in accounting for long term ESG risks.

2. Environmental, social and governance (ESG) preferences in the distribution of insurance-based investment products

This EU initiative is an amendment to the directive related specifically to the distribution of insurance-based investment products. Currently, when providing investment advice, product selection of insurance-based investment products mainly focus on a customer’s previous

investment experience and their risk profile; ESG preferences are rarely considered. This is due to a lack of knowledge of ESG risks among customers and investors. This regulation amends the Delegated Regulation (EU) 2017/2359 to require customers to provide ESG preferences and require insurance products to include information on their ESG impact.

3. Organizational requirements and operating conditions for investment firms

This EU initiative is an amendment to the directive related more generally to investment firms. The amendments made to this regulation are similar to the ones mentioned above. The EU will require investment firms to consider the ESG preferences of their customers, while also

providing ESG related information of their products.

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This initiative relates to the benchmarks that provide the basis for the pricing of financial

instruments and the assessment of financial performance. Initially, this regulation was a response to the manipulation of financial benchmarks such as LIBOR and EURIBOR and benchmarks within the energy, oil and foreign exchange sectors. In an effort to facilitate more sustainable investing, the EU wants to produce two benchmarks that measure and report an investment’s sustainability exposure. To avoid ‘green washing95_{’ of indices, the EU has proposed the creation}

of two benchmarks: low-carbon benchmarks and positive carbon impact benchmarks.

5. Disclosures relating to sustainable investments and risks

While there are varying levels of disclosure practices within the financial sector, this amendment seeks to provide uniform requirements and framework on the disclosure of non-financial metrics, in particular ESG metrics and sustainability risks. How sustainability risks are integrated within the decision-making are to be disclosed in order to provide end-investors with accurate

information when choosing financial products.

6. Establishment of a framework to facilitate sustainable investment

This document is the proposal document combining the regulatory initiatives to facilitate more sustainable finance. It provides objectives of what environmental sustainability should achieve. Criteria are specified which can be used to determine the environmental sustainability of economic activities of varying degrees. As long as they meet the criteria set out in this regulation, countries can use their own labels.

Indicators and Operationalization

Below are the indicators for the corresponding variables. There are two different dependent variables for each different population sets. The explanatory and independent variables apply to both sets of dependent variables.

Step 1: Standardized and compiled data from the transparency register and consultation

responses.

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the two dependent variables to analyze which explanatory or control variables if any, have an influence.

Step 3: Consultation response data used to test hypotheses EU-SF H1, H2. Regressions run

using the two dependent variables. Explanatory, independent and control variables regressed against the two dependent variables to analyze which if any, have an influence. To provide further insight into the lobbying strategies and preferences employed by financial organizations summarized comments of the responses categorized to detect a pattern in relation to the other types of variables.

Dependent Variable: Lobbying behavior includes corporate political activity (CPA) on the EU level and framing strategies used by organizations in their responses to the EU sustainable finance regulations.

• Corporate Political Activity (EU-TR H1, H2): CPA indicators are from the EU Transparency Register (TR), which is an open media source.96 The information that is included on the transparency register is telling of how transparent organizations are willing to be about their lobbying activities. Transparency is a major aspect of CSR/SRI activities. The following specific indicators are recorded97:

• Number of persons involved in conducting EU relations

• Participation in Intergroups (EP), Participation in Industry forums (EP), Commission Expert Groups and other similar entities (EC)

The main issue with the Transparency Register population is the fact that this register is not mandatory. Organizations can voluntarily register their lobbying resources; the EU does not verify the information submitted. Hence, organizations can underreport the amount of resources allocated to lobbying the EU. Additionally, this self-regulation does not capture the organizations that did not voluntarily register. The resources and additional activities listed in the TR are not the only forms of lobbying organizations employ to influence European regulations. The voluntary disclosure nature of the dependent variable could have resulted in an underestimation of the factors on the outcome.

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TR- Dependent Variables

Variable Obs Mean Std. Dev. Min Max

Number of people 4450 4,91 7,68 1 170

Full Time Equivalent (FTE) 4450 2,64 4,75 0,2 92 Other EU participation (Y/N) 4450 0,22 0,41 0 1 Table 5: Summary of TR Dependent Variables

The first dataset is from the Transparency Register has 4450 observations. Belgium is the

country with the highest number of people involved in lobbying the EU, followed by other major European countries. Firms and business associations have the highest number of people involved in lobbying the EU as well as additional participation in expert groups and committees.

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Figure 6: Sum of People Involved by Actor Type

• Framing Methods (EU-SF H1, H2): The political participation of financial organizations provide a predictive trend for frames used by financial organizations. For instance, if some organizations do not respond to the consultation process, their levels of political participation are also most likely lower in general. The responses to the consultation are coded based on their text to analyze the framing techniques within this lobbying context. Looking for a proactive response and public frame accurately test whether medium-high SRI level

organizations are consistent in promoting their mandates in the policy making process. Below are the specific indicators:

• Response type:

• Proactive: the organization was positive about the regulation impact and provided concrete suggestions to move the regulation forward.

• Frames employed by the actor:

• Public: the organization mentioned topics and stakeholder groups related to other industries in relation to the regulation.

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SF- Dependent Variables

Number of people 187 10,53 11,98 1 71

Full Time Equivalent (FTE) 187 5,60 6,28 0,2 35 Other EU participation (Y/N) 187 0,42 0,49 0 1

Stance Proactive 219 0,53 0,50 0 1

Stance Reactive 219 0,50 0,50 0 1

Frame Public 219 0,54 0,50 0 1

Frame Business 219 0,85 0,36 0 1

Table 6: Summary of SF Dependent Variables

There are 219 observations in the SF consultation responses population: 186 of these

organizations are in the TR. The organizations that responded to the consultations had a higher average number of people involved in lobbying the EU. Furthermore, the percentage mean of organizations that participate in EU expert groups nearly doubles in the SF responses population compared to the TR population.

There was an even split among SF responses with 53% proactive and 50% reactive. There were about six responses considered both proactive and reactive. Medium/High SRI level

organizations made up 53% of the proactive responses, low SRI level organizations comprised 47% of the proactive responses. The organizations that reacted proactively also had a marginal amount more people involved in lobbying the EU. Organizations from Belgium and the United Kingdom had the highest number of proactive responses and use of the public frame, but also had the highest number of responses to the consultation period in general. Additionally, NGOs and business associations were the type of actors to respond proactively the most using the public frame. Meanwhile, the business frame was in 85% of the cases. The public frame was used 54% of the time. The use of public frame was split evenly among the different SRI level organizations.

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Independent Variables: These variables mentioned in the hypotheses and could have a

significant impact on the outcome. There are institutional specific variables and industry related variables when analyzing financial organizations’ lobbying strategies.

TR- Independent Variables

SRI Low 178 0,46 0,50 0 1

SRI Medium or High 178 0,54 0,50 0 1

OSII or GSIB 178 0,25 0,44 0 1

Logged GDP 4448 12 0,58 8,29 13,29

# of MFIs in country 4450 487,10 515 0 1626

Rank of Financial City 4450 487,10 515 0 1626

Bank (Y/N) 4450 0,06 0,23 0 1

Industry Association (Y/N) 4450 0,43 0,50 0 1

Lobbying Type 4450 2,38 1,11 1 6

Actor Type 4450 4,13 1,89 1 13

SF- Independent Variables

SRI Low 219 0,60 0,49 0 1

SRI Medium or High 219 0,40 0,49 0 1

OSII or GSIB 219 0,04 0,20 0 1

Logged GDP 219 12,07 0,43 10,8 13,29

# of MFIs in country 219 511 512 31 1626

Rank of Financial City 219 38 25 1 85

Bank (Y/N) 219 0,09 0,28 0 1

Industry Association (Y/N) 219 0,53 0,50 0 1

Lobbying Type 219 2,33 0,90 1 5

Actor Type 219 4,15 2,61 1 13

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• Institutional: Each organization has institutional specific variables applied to them. These include the organization’s national GDP, the number of monetary financial institutions in the country and how its’ financial centre ranks internationally.

• GDP levels will measure a country's resource pool. While GDP levels do not directly determine the political influence a country has within the EU, a higher GDP level does provide it with indirect influence. This indirect influence can be in the form of having more resources to lobby EU institutions.

• The number of monetary financial institutions operating in a country demonstrates the level of financial industry development in a country. The level of development

translates for the power the industry has within its national economy.

• The international financial centre rank provides a comparative measure. A country's integration into the international financial industry represents a country’s integration into the international financial industry and the regulatory exposure. The proposed regulations are relevant to EU and international standards, making this indicator relevant.

• Industry: These variables apply individually to the different financial organizations. These indicators include the size of the organization and regulatory exposure.

• The size of an organization is the self-reported amount provided with every consultation response. The size of an organization influences its lobbying efforts, since there are more resources available for lobbying effort.

• The level of regulatory exposure is measured by whether a bank is a global systemically important bank (GSIB/OSII). Banks that are GSIB/OSII have more stringent financial requirements and have to report to national and international regulators on a more frequent basis. The level of government involvement in a bank's activities makes

financial regulation more important, resulting in higher lobbying activities. Additionally, organizations with higher regulatory exposure are in more constant communication with government institutions.

Explanatory Variable: Level of CSR/ SRI commitment: SRI levels are on a fuzz set basis. An important assumption made is that organizations with high levels of SRI will also have a robust CSR policy and engagement. The main interest in this research is measuring the impact of

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CSR/SRI commitment. While the impact may not be the most significant, it provides new insight making it an important variable.

• High SRI level: Financial organizations that market themselves as focused on SRI or ESG goals specifically.

• Medium SRI level: Financial organizations with membership to the European Sustainable Investment Forum (Eurosif) or the national equivalent.

• Low SRI level: Financial organizations that meet neither of the above two requirements.

As can be seen in the tables above, the explanatory variable, the SRI level has fewer observations within the TR population. This is due to organizations responding multiple times to the

consultations, organizations not registered in the TR, or organizations that responded to the consultation but have not listed finance or banking interests in their TR registration. Within the TR population there is a higher percentage of organizations that have a medium or high level of SRI commitment. About 60% of the organizations that responded to the SF consultations had low levels of SRI. This could mean that the majority of consultation responses are organizations with low levels of SRI attempting to delay the implementation of the SF regulations.

However, the classification of the SRI variable is not perfect. The SRI variable as well as some of the firm and national specific factors were classified manually, which results in biases. Regressions that included the SRI levels variable have only around 200 observations. An organization’s SRI investments and its participation in associations related mainly to

environmental sustainability classified SRI levels. There is little account for the SRI activities of organizations focused on the governance and social aspect of ESG. Thus, the efforts of

organizations that do a significant amount on the social and governance fronts could potentially be undervalued. Additionally, unaccounted for are the different SRI methodologies used by organizations. With more time and the help of ESG metrics, the number of observations and scope of SRI considerations could improve the classification of data.

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Figure 7: Number of people involved lobbying the EU by Country, SRI level

Control Variables: Additional variables that could affect the outcome are organization specific indicators. These apply to both populations.

• Bank (Y/N) or Bank/Finance/Insurance Association: This variable is important since some of the regulations may be more or less relevant to certain types of financial organizations. Additionally, if it is an association represents numerous organizations that may affect their lobbying resources and strategies.

• Lobbying Type: This self-reported variable within the transparency register provides a control for the type of lobbying strategy chosen per particular organization.

• Actor Type: This variable controls for the types of organizations. Coded using the coding document and transparency register provided data.

• Level of Interest: This self-reported variable within the transparency register accounts for the various levels of mobilization.

Only about 9% of the responses to the regulation came from banks, while about 53% of the responses came from associations/organizations that represent grouped banking, finance or insurance organizations' interests. This high number of associations represented in the population

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can also be seen through the mean of the actor type, which in both populations are business associations. Both populations contain a number of outliers that result in high standard deviations that affect the statistical results. Below is a more in depth analysis according to hypothesis.

Results and Analysis

Regression Results

An OLS regression analyzes the impact of various factors on the lobbying resources and

lobbying methods employed by organizations. No weighting is applied to the observations, since the majority of the variables are in binary or interval formats. The OLS regression is applicable to this research, because it analyzes multiple treatment effects. Furthermore, there is a substantial amount of observations. There are also large variances within the data; the OLS regression provides a statistically most accurate output. In addition to the OLS regressions, the responses of organizations provide more analysis. When combining the results of all four hypotheses, the conclusion is that the null hypothesis holds. There is no significant difference in lobbying resources and methods by organizations with differing SRI levels. Furthermore, none of the additional institutional or firm specific factors had a significant impact on either the

organization’s lobbying resources or methods. This is contrary to the hypotheses. Below are the regression results according to hypothesis. The results show the dependent variables of each hypothesis at the top. Different regression results listed correspond to the different groups of factors that affect the dependent variable. There are four columns for each hypothesis: SRI level, firm specific factors, institutional factors, all factors. In all of the regressions, the SRI level factors are included.

EU-TR: The two dependent variables chosen to measure the hypotheses pertaining to the

transparency register (TR) were the self-reported number of people involved as well as

participation in any EU expert groups or committees. Against each of the dependent variables, the same groups of variables were regressed. Below is a consolidated table of the EU-TR H1, H2 results. In general, firm specific factors had more influence on lobbying resources than the institutional factors. Furthermore, the SRI level does not influence the number of people

involved, as both the explanatory variable and the constant have significant positive correlations. However, a low SRI level results in lower participation, but not at a significant level. Meanwhile

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a medium/high SRI level only results in an incremental amount of EU political participation. Due to more interaction with a wider scope of stakeholders, high level SRI organizations participate more but have fewer resources than organizations with low levels of SRI.

Table 8: Regression Results for Transparency Register Population

EU-TR: H1: Countries with higher resources (overall and policy-specific) will have higher lobbying expenditure and participation.

This hypothesis relates to the “National Factors” column; the number of people involved and additional EU participation are the dependent variables. The r2 values for the models of both dependent variables are low (r2 = .0813 (#), r2= ..0598 (Add)). This means that the overall model has little to no explanatory power on an organization’s lobbying resources or additional

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participation. This is especially true for the dependent variable additional EU participation, where none of the national variables have any significant impact.

Similarly, the national factors have no impact on the # of people involved. However, in this regression, a low SRI level has a positive impact at a significant level. If an organization is at a low SRI level, this increases the number of people involved by three.

The low impact of number of MFIs and a country’s financial centre ranking on organizations’ lobbying resources and political participation prove that institutional factors do not heavily influence an individual firm’s lobbying resources or additional political participation at the EU. Rather, analyzing the differences between how organizations attempt to influence the regulatory process would provide insight into the use of national resources. Countries with large financial sectors have more expertise to influence the regulatory process. As a result of information asymmetry, powerful economies capture the regulators during the regulatory process, without utilizing significantly more resources. Or, the financial regulatory environment might be pluralistic, offsetting the influence of the factors. Additionally, a country’s exposure to the international financial market does not influence the resources employed. The lack of a resource increase could be due to the certainty of financial regulation. In the context of the financial crisis aftermath, increased public salience has brought about more financial regulation.

EU-TR: H2: Larger organizations with more regulatory exposure and resources will have higher lobbying expenditure and participation.

The column labeled “Firm Specific Factors” display the results relevant to this hypothesis. For both dependent variables, the models’ significance levels are not high enough to be relevant (r2

= .0562 (#), r2= .0404 (Add.)). These firm specific factors have little explanatory power on the dependent variables. Despite the low r2 values, some findings give insight into lobbying resources of banking and financial organizations. The regression results demonstrate that an organization's regulatory exposure does not significantly affect the number of people involved. Meanwhile, higher regulatory exposure shown by the OSII/GSIB factor does marginally influence whether an organization pursues additional EU participation. Regulatory exposure

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increasing political participation but not lobbying resources could be due to more interaction with regulatory bodies.

When an organization’s level of interest increases, both the number of people involved and additional EU participation also increase. There is a negative correlation between whether the organization is a bank and the lobbying resources/participation it registered in the TR. Banks could be allocating their lobbying resources to have business associations lobby on their behalf. While banks make up only 6% of the TR population, business associations represent 24%. Individual banks find it too expensive to lobby at the EU level and combine their efforts to represent a common position. When the organization is a business association, there is an

increase of 7.81 people involved. However, when an organization is a business association, there is a decrease in political participation. This gap between the amount of resources reported and the political participation can be the result of business associations employing non-market strategies to attempt to influence the regulatory process. Individual organizations could be employing resources directly at the national regulatory level or directly to non-target lobbying groups to influence the policymaking.

In conclusion, the regulatory exposure of an organization has no influence on the lobbying resources. Regulatory exposure and level of interest do have a small positive impact on

additional EU political participation by organizations. Most likely, these organizations pool their resources and lobby using business associations. This explains the difference between lobbying resources increasing when an organization is a business association and additional EU

participation decreasing minutely. Pooling resources behind a business association allows more resources to represent a common front. This supports the cost-benefit theory that it is important enough for organizations to lobby, but by pooling resources reduce costs. Additionally, this conclusion complicates the theory of increasing actor plurality within the financial sector. While more organizations are indirectly present in the regulatory environment, fewer organizations represent directly on the EU level. This is also reduces the variety of responses in the regulatory environment and supports the theory of financial organizations pursuing a more cooperative and united lobbying approach.

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EU-SF: The stances and frames employed by organizations that responded to the Sustainable

Finance (SF) consultations are the two dependent variables that measure the lobbying methods. Refer to the research design section for a description of the dependent variables. Similar to the TR population, the same groups of variables were regressed against each dependent variable. In the table below, are the EU-SF H1, H2 consolidated results. The SRI levels of an organization have a small but significant impact on the dependent variables, when regressed along with both institutional and firm specific variables. The first hypothesis holds partly, medium-high SRI level organizations are by a small amount more likely to respond proactively. The SRI level of an organization, the number of MFIs, or being a business association influences the proactive response the most. Regulatory exposure and size do not have a significant influence on the proactive response.

The second hypothesis holds, there is a positive correlation with medium-high SRI level organizations and public frames. Whether an organization is a business association and the SRI level influences the choice for a public frame the most. Institutional factors do not influence the choice for a public frame. In general, there are a few miniscule findings on what influences the lobbying response and frames of organizations in response to the SF consultations. The lacks of significant results demonstrate that there are factors beyond institutional and firm specific factors that influence the lobbying methods of organizations responding to the SF consultations. Due to heightened public salience and actor plurality, organizations think the regulation is inevitable and not worth lobbying. This first consultation stage could be too early for organizations to have any influence on the regulatory process.