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

Author

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  • Gunther Capelle-Blancard

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Stephanie Monjon

    (CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this study, we examine whether the financial performances of socially responsible investment (SRI) mutual funds are related to the features of the screening process. Based on a sample of French SRI funds, we find evidence that a greater screening intensity slightly reduces 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. Lastly, when the quality of the SRI selection process is proxied by the rating provided by Novethic, its impact is not significant, while a higher strategy distinctiveness amongst SRI funds, which also gives information on the quality of the selection process, is associated with better financial performance.

Suggested Citation

  • Gunther Capelle-Blancard & Stephanie Monjon, 2014. "The Performance of Socially Responsible Funds: Does the Screening Process Matter?," Post-Print hal-00802363, HAL.
    • Handle: RePEc:hal:journl:hal-00802363
    DOI: 10.1111/j.1468-036X.2012.00643.x
    Note: View the original document on HAL open archive server: https://enpc.hal.science/hal-00802363v1
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    References listed on IDEAS

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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