Socially Responsible Investments: Methodology, Risk Exposure and Performance
Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)
Jenke Ter Horst
Tilburg University - Center for Economic Research (CentER)
University of Warwick - Finance Group
June 1, 2007
TILEC Discussion Paper No. 2007-013
ECGI - Finance Working Paper No. 175/2007
This paper surveys the literature on socially responsible investments (SRI). Over the past decade, SRI has experienced an explosive growth around the world. Particular to the SRI funds is that both financial goals and social objectives are pursued. While corporate social responsibility (CSR) - defined as good corporate governance, sound environmental standards, and good management towards stakeholder relations - may create value for shareholders, participating in other social and ethical issues is likely to destroy shareholder value. Furthermore, the risk-adjusted returns of SRI funds in the US and UK are not significantly different from those of conventional funds, whereas SRI funds in Continental Europe and Asia-Pacific strongly underperform benchmark portfolios. Finally, the volatility of money-flows is lower in SRI funds than of conventional funds, and SRI investors' decisions to invest in an SRI fund are less affected by management fees than the decisions by conventional fund investors.
Number of Pages in PDF File: 51
Keywords: socially responsible investments, ethical investing, corporate social responsibility, mutual funds, performance evaluation, money-flows, investment screens, mutual funds
JEL Classification: A13, G11, G12, G34
Date posted: May 10, 2007 ; Last revised: September 2, 2014
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