The Performance of Socially Responsible Funds: Does the Screening Process Matter?
AbstractThis paper is about the financial performance of mutual funds that practice Socially Responsible Investing (SRI). First, we measure the financial performance of a sample of 116 French SRI mutual funds over the period 2004-2007. As expected, and according to previous studies, our results show that SRI funds do not outperform the market, whatever the performance measure considered. Then, we assess the financial performances within our sample of SRI funds, as suggested by Barnett and Salomon (2006). Precisely, we examine whether the financial performances of these funds are related to the features of the SRI selection process. We find evidence that a greater screening intensity reduces SRI financial performance, but the relationship runs in the opposite direction when screening gets tougher. Further, we show that only sectoral screens – such as avoiding “sin” stocks – decrease financial performance, while transversal screens – commitment to UN Global Compact Principles, ILO/Rights at Work, etc. – have no impact. Other characteristics of the screening process like shareholder activism, or the overall quality of the SRI process do not have any significant impact either.
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Bibliographic InfoPaper provided by CEPII research center in its series Working Papers with number 2011-12.
Date of creation: May 2011
Date of revision:
Socially Responsible Investing (SRI); Sustainable and Responsible Investment; Ethical Investment; Corporate Social Responsibility (CSR); Portfolio Choice; Ratings;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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- Gunther Capelle-Blancard & Stéphanie Monjon, 2010. "Socially Responsible Investing: it Takes More than Words," Working Papers 2010-15, CEPII research center.
- Rathner, Sebastian, 2013. "The Relative Performance of Socially Responsible Investment Funds. New Evidence from Austria," Working Papers in Economics and Finance 2013-1, University of Salzburg.
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