The academic literature's emphasis, in the role of pension funds in socially responsible investment, remains focused on macro discussions such as the suitability of SRI for pension fund investment and normative discussions of how pension funds can be catalysts for change towards global sustainability. It is also noted by some commentators that via pension funds, the environmental, social and governance issues that underpin SRI are becoming a part of mainstream investment. These macro level claims provide very limited evidence of, or insights into, the actual functioning or close-to-reality experiences of pension funds in the context of SRI, which is vital in fully comprehending the role of pension funds in achieving sustainable business activities. This thesis investigates and analyzes the micro level developments and dynamics that hinder or facilitate integration of SRI into pension fund investment to address the above mentioned divide. Using a grounded theory approach, the thesis presents a theoretical model of institutionalization of SRI into pension fund investment. Taking a social constructionist perspective and the related concept of human agency, it proposes that cognitive factors, coupled with structural context, determine whether a pension fund integrates or discards SRI strategies in its investment processes. The model is based on in-depth case studies of three pension funds, each with certain distinguished and similar characteristics, to provide judicious explanations of what affects the institutionalization of SRI. The thesis explains how pension fund trustees and managers customize and internalize a position on SRI based on particular 'constructions' or 'interpretations' of the concept and of fiduciary responsibility. It also posits that the context of each pension fund presented in the thesis is different and that although all three have similar broader objective, i.e. to provide retirement income to its members, each has specific investment objectives, constraints and institutional environments that are unique. Thus, all pension funds or institutional investors do not have a common investment approach towards achieving their goals and cannot be categorized as principals of economic rationality in the capital market. The duality of context and agency in creating investment processes and changes within that is stressed in this thesis.