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The urge to act: A comparison of active and passive socially responsible investment funds in the United States

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  • Xing Chen
  • Bert Scholtens

Abstract

Innovative finance vehicles are required to facilitate the transition towards a sustainable society. Here, we investigate two very successful innovations in the fund industry, namely index mutual funds and passively managed exchange traded funds (ETFs). We study socially responsible investment (SRI) funds in the United States and particularly focus on their financial performance, cost of investing and degree of active management. We do not find persuasive evidence that the actively managed funds perform better than their passively managed counterparts do. Furthermore, we find that some active SRI funds seem to operate as ‘closet indexers’ with a low degree of active management. We conclude that passively managed socially responsible funds have the potential to enrich the spectrum of financial products that may help advance the sustainability transition.

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  • Xing Chen & Bert Scholtens, 2018. "The urge to act: A comparison of active and passive socially responsible investment funds in the United States," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(6), pages 1154-1173, November.
    • Handle: RePEc:wly:corsem:v:25:y:2018:i:6:p:1154-1173
    DOI: 10.1002/csr.1529
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    5. Juan Carlos Matallín‐Sáez & Amparo Soler‐Domínguez & Salvador Navarro‐Montoliu & Diego Víctor de Mingo‐López, 2022. "Investor behavior and the demand for conventional and socially responsible mutual funds," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(1), pages 46-59, January.
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