Private social, ethical and environmental disclosure

Purpose - The purpose of this paper is to determine the extent to which social, ethical and environmental (SEE) disclosure is being integrated into institutional investment. The aim is also to investigate the interplay between private and public SEE disclosure. Design/methodology/approach - The paper uses a grounded theory methodology involving interviews with 21 members of the UK institutional adjustment community. Findings - The paper found that institutional investors did not consider that public SEE disclosure was adequate for their portfolio investment decisions, suggesting that SEE disclosure was decision‐useful. Consequently, this perceived market failure in public SEE disclosure has been supplemented by the development of sophisticated private SEE disclosure channels. Further, the interviews indicated that this private SEE disclosure process was becoming dialogic in nature, since not only were institutional investors initiating the engagement process with companies but also companies were starting to request information on the SEE disclosure required by institutional investors. This finding contrasts with previous work which found that the private disclosure process in financial reporting was essentially user‐oriented and uni‐directional. Originality/value - This paper highlights the importance of SEE disclosure to a crucial user group, institutional investors. The research contributes to the SEE disclosure literature by revealing details of the evolving private SEE disclosure process for the first time.