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Are SRI funds conventional funds in disguise or do they live up to their name?

In: Research Handbook of Investing in the Triple Bottom Line

Author

Listed:
  • Christin Nitsche
  • Michael Schröder

Abstract

In recent years, the socially responsible investing (SRI) industry has become an important segment of international capital markets by incorporating ESG (environmental, social and governance) factors into investment selection processes. This study analyses whether SRI mutual funds are conventional funds in disguise or invest in line with their ESG objectives. In contrast to other studies, the analysis exclusively focuses on the non-financial performance of SRI vis-Ã -vis conventional funds and applies ESG corporate ratings of three rating agencies (Oekom, Sustainalytics and ASSET4) for a European and a global fund universe. The SRI and non-SRI funds are analyzed with respect to differences in their Top fund holdings, the average ESG values and the distribution of ESG performance, as well as the significance of rating differences by utilizing cross-sectional regressions. At a first glance, the top holdings of both fund types seem to be very similar, but SRI funds have on average higher ESG rankings. The cross-sectional regressions show that the ESG rating differences between SRI funds and conventional funds are significantly positive, i.e. SRI funds exhibit significantly higher ESG ratings than conventional funds.

Suggested Citation

  • Christin Nitsche & Michael Schröder, 2018. "Are SRI funds conventional funds in disguise or do they live up to their name?," Chapters, in: Sabri Boubaker & Douglas Cumming & Duc K. Nguyen (ed.), Research Handbook of Investing in the Triple Bottom Line, chapter 19, pages 414-446, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17813_19
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    Cited by:

    1. Martinez Meyers, Susana & Ferrero-Ferrero, Idoya & Muñoz-Torres, María Jesus, 2024. "ARE sustainable funds doing the talk and the walk? An ESG score analysis of fund portfolio holdings," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 1526-1541.
    2. Jean-Stéphane Mésonnier, 2019. "Banks' climate commitments and credit to brown industries: new evidence for France," Working papers 743, Banque de France.
    3. Mohammad Badrul Muttakin & Tarek Rana & Dessalegn Getie Mihret, 2022. "Democracy, national culture and greenhouse gas emissions: An international study," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 2978-2991, November.
    4. Laura Mervelskemper & Daniel Streit, 2017. "Enhancing Market Valuation of ESG Performance: Is Integrated Reporting Keeping its Promise?," Business Strategy and the Environment, Wiley Blackwell, vol. 26(4), pages 536-549, May.

    More about this item

    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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