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The Performance of Socially Responsible Funds: Does the Screening Process Matter?

  • Gunther Capelle-Blancard
  • Stéphanie Monjon

This 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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Paper provided by CEPII research center in its series Working Papers with number 2011-12.

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Date of creation: May 2011
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Handle: RePEc:cii:cepidt:2011-12
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  17. Schröder, Michael, 2005. "Is there a Difference? The Performance Characteristics of SRI Equity Indexes," ZEW Discussion Papers 05-50, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  20. Renneboog, Luc & Ter Horst, Jenke & Zhang, Chendi, 2011. "Is ethical money financially smart? Nonfinancial attributes and money flows of socially responsible investment funds," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 562-588, October.
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