Financial Performance of Socially Responsible Investment: Does the Visibility of Firms in the Portfolio Matter?

34 Pages Posted: 4 Feb 2014 Last revised: 5 Feb 2015

Date Written: January 2015

Abstract

In this study we investigate the question of financial performance of Socially Responsible Investment (ISR) funds using BNP Paribas Investment Partners (BNPP IP) Best-In-Class (BIC) universe of European stocks. We originally contribute to the literature by developing analyses enlightened by recent theoretical developments. We show that within this market, from January 2008 to July 2013, it has been possible to create financial value added by selecting systematically stocks of firms in the BIC universe. Moreover we show a negative relationship between visibility of firms and the amount of performance that has been generated by portfolios built with stocks of firms in the BIC universe (i.e. SRI funds): the relationship between extra-financial and financial performance of SRI funds interacts with visibility of constituents. This interaction suggests that an allocation scheme which selects neglected constituents could be the right strategy to adopt if financial outperformance is the objective. In addition this interaction can help in explaining the various results obtained by empirical studies interested in the performance of SRI portfolios which do not control for visibility of constituents.

Keywords: Socially responsible investment, financial performance, visibility effect

JEL Classification: G11, G12, M14

Suggested Citation

Lapointe, Vincent, Financial Performance of Socially Responsible Investment: Does the Visibility of Firms in the Portfolio Matter? (January 2015). Available at SSRN: https://ssrn.com/abstract=2386015 or http://dx.doi.org/10.2139/ssrn.2386015

Vincent Lapointe (Contact Author)

Ostrum AM ( email )

Paris
France

Register to save articles to
your library

Register

Paper statistics

Downloads
72
rank
318,514
Abstract Views
577
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information