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

51 Pages Posted: 7 Jan 2011 Last revised: 4 Jan 2012

See all articles by Gunther Capelle-Blancard

Gunther Capelle-Blancard

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES)

Stéphanie Monjon

CIRED, International Research Center on Environment & Development, France

Date Written: December 8, 2010

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.

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, C32

Suggested Citation

Capelle-Blancard, Gunther and Monjon, Stéphanie, The Performance of Socially Responsible Funds: Does the Screening Process Matter? (December 8, 2010). Finance and Corporate Governance Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1734764 or http://dx.doi.org/10.2139/ssrn.1734764

Gunther Capelle-Blancard (Contact Author)

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES) ( email )

106-112 Boulevard de l'hopital
106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647
France

Stéphanie Monjon

CIRED, International Research Center on Environment & Development, France ( email )

Campus du Jardin Tropical
45 bis avenue de la Belle Gabrielle
F94736 Nogent sur Marne Cedex
France

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