ESG-Persistence in Socially Responsible Mutual Funds
11 Pages Posted: 30 Aug 2012 Last revised: 20 Sep 2012
Date Written: August 12, 2012
This paper analyzes the persistence of environmental, social, and governance (ESG)-scores in socially responsible (SR) mutual funds. ESG-scores can be used as a measure for the level of social responsibility of an SR mutual fund. It is shown that ESG-scores persist for approximately two years. However, the persistence of the ESG-scores is terminated after approximately three years. This implies that value-driven investors of SR mutual funds who seek high-ESG investments cannot rely upon a long-term continuation of high ESG-scores and thus need to rebalance their portfolio from time to time. The lack of long-term persistence in the ESG-scores is caused by changes in the holdings of the SR mutual funds.
Keywords: socially responsible investing, ESG-scores, corporate social responsibility, persistence
JEL Classification: G11, M14
Suggested Citation: Suggested Citation