Measuring the Risk Impact of Social Screening
9 Pages Posted: 22 Sep 2012
Date Written: August 1, 2012
Since the nineteenth century investors have incorporated social or ethical values into their portfolios, an approach described over time with such labels as SRI (socially responsible investing), ESG (environmental, social, governance), or MRI (mission-related investing). Among investment professionals a contentious debate rages as to whether SRI is a well-intentioned effort doomed to suffer a performance penalty or a viable alternative with the potential for alpha due to screening based on the assumption that such screening will be rewarded in the market. The performance debate has been covered in other research; this article focuses on the measurement of risk introduced by SRI screening for public equities. For simplicity, the term SRI is used as the term for screened investing in general, with ESG used as a term for the specific environmental, social, and governance issues screened.
Keywords: ESG, SRI, MRI, Environmental Social Governance, Mission-Related Investing, Socially Responsible Investing, Risk Measurement
JEL Classification: G10, G11
Suggested Citation: Suggested Citation