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Nice but cautious guys: The cost of responsible investing in the bond markets

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Author Info

  • Bastien Drut

Abstract

The aim of this paper is to measure the cost of investing responsibly for different risk aversion levels by taking the example of green sovereign bond portfolios. We show that for developed markets, the cost of being a nice guy is lower if you are cautious (i.e. a higher level of risk aversion) while this is the contrary for emerging markets. It implies that managers of Socially Responsible Investment (SRI) funds should gauge investor’s risk aversion prior to evaluating the “SRI cost”. The SRI cost is zero in some cases.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 09-034.RS.

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Length: 12 p.
Date of creation: 2009
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:09-034

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Related research

Keywords: Portfolio Selection; Socially Responsible Investment; Risk Aversion; Environmental Performance Index; Sovereign Bonds.;

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References

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  1. Bastien Drut, 2009. "Sovereign Bonds and Socially Responsible Investment," Working Papers CEB 09-014.RS, ULB -- Universite Libre de Bruxelles.
  2. Derwall, Jeroen & Guenster, Nadja & Bauer, Rob & Koedijk, Kees, 2005. "The eco-efficiency premium puzzle," Open Access publications from Maastricht University urn:nbn:nl:ui:27-19331, Maastricht University.
    • Derwall, J.M.M. & Günster, N.K. & Bauer, R. & Koedijk, C.G., 2004. "The Eco-Efficiency Premium Puzzle," Research Paper ERS-2004-043-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  3. Best, Michael J. & Grauer, Robert R., 1990. "The efficient set mathematics when mean-variance problems are subject to general linear constraints," Journal of Economics and Business, Elsevier, vol. 42(2), pages 105-120, May.
  4. Michael J. Best & Robert R. Grauer, 1991. "Sensitivity Analysis for Mean-Variance Portfolio Problems," Management Science, INFORMS, vol. 37(8), pages 980-989, August.
  5. Alexander, Gordon J. & Baptista, Alexandre M., 2006. "Portfolio selection with a drawdown constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3171-3189, November.
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Cited by:
  1. Bastien Drut, 2010. "Social responsibility and mean-variance portfolio selection," EconomiX Working Papers 2010-3, University of Paris West - Nanterre la Défense, EconomiX.
  2. Bert Scholtens, 2010. "The Environmental Performance of Dutch Government Bond Funds," Journal of Business Ethics, Springer, vol. 92(1), pages 117-130, April.

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