The Performance of Socially Responsible Funds: Does the Screening Process Matter?
Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES); Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)
CIRED, International Research Center on Environment & Development, France
December 8, 2010
Finance and Corporate Governance Conference 2011 Paper
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.
Number of Pages in PDF File: 51
Keywords: Socially Responsible Investing (SRI), Sustainable and Responsible Investment, Ethical Investment, Corporate Social Responsibility (CSR), Strategy Distinctiveness Index, Portfolio Choice, Ratings
JEL Classification: G11, Q56, C32working papers series
Date posted: January 7, 2011 ; Last revised: January 4, 2012
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