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On the Price of Morals in Markets: An Empirical Study of the Swedish AP-Funds and the Norwegian Government Pension Fund

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  • Andreas G. F. Hoepner

    (University of Reading
    Stockholm School of Economics)

  • Lisa Schopohl

    (University of Reading)

Abstract

This study empirically analyses the exclusion of companies from investors’ investment universe due to a company’s business model (sector-based exclusion) or due to a company’s violations of international norms (norm-based exclusion). We conduct a time-series analysis of the performance implications of the exclusion decisions of two leading Nordic investors, Norway’s Government Pension Fund-Global (GPFG) and Sweden’s AP-funds. We find that their portfolios of excluded companies do not generate an abnormal return relative to the funds’ benchmark index. While the exclusion portfolios show higher risk than the respective benchmark, this difference is only statistically significant for the case of GPFG. These findings suggest that the exclusion of the companies generally does not harm funds’ performance. We interpret these findings as indicative that with exclusionary screening, as practiced by the sample funds, asset owners can meet the ethical objectives of their beneficiaries without compromising financial returns.

Suggested Citation

  • Andreas G. F. Hoepner & Lisa Schopohl, 2018. "On the Price of Morals in Markets: An Empirical Study of the Swedish AP-Funds and the Norwegian Government Pension Fund," Journal of Business Ethics, Springer, vol. 151(3), pages 665-692, September.
    • Handle: RePEc:kap:jbuset:v:151:y:2018:i:3:d:10.1007_s10551-016-3261-0
    DOI: 10.1007/s10551-016-3261-0
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