Investments in Socially Responsible Funds: Is Good Better than the Great?

10 Pages Posted: 23 Sep 2017

See all articles by Nandita Das

Nandita Das

Delaware State University - Accounting and Finance Department

Bernadette Ruf

Delaware State University - Accounting and Finance Department

Aman Sunder

College for Financial Planning

Swarn Chatterjee

University of Georgia

Date Written: September 22, 2017

Abstract

This paper examines the performances of Socially Responsible Investment (SRI) funds with respect to the market over a 12 year period (2005-2016) that covers the periods just prior to, during, and after the Great Recession. This study compares the performances of SRI funds based on their MorningstarĀ® ESG (Environmental, Social, and Governance) fund portfolio ratings. Additionally, we analyze the factors associated with the performances of the SRI funds using 3 separate four year panels (2005-2008; 2009-2012; 2013-2016). We analyze the factors associated with the performances of the SRI funds over these periods. The study period is divided into three sub-periods of 48 months each in order to examine whether the time periods leading to and following the Great Recession had any significant impact on the results. We further examine the performances of the SRI funds after controlling for the Fama-French 3- and 5-factors. The preliminary findings from our study indicate that the SRI funds ranked in the middle quantiles of the ESG ratings out-performed funds in the upper and lower quantiles on a risk-adjusted basis. The results also show that SRI funds in the middle ESG rating level received the most net cash inflow, indicating investorsā€™ preference for medium rated SRI funds.

Keywords: SRI, Investing, Risk Adjusted Return, Wealth Management, Financial Planning, Sustainability, Portfolio Management

JEL Classification: G01, G11, G14

Suggested Citation

Das, Nandita and Ruf, Bernadette and Sunder, Aman and Chatterjee, Swarn, Investments in Socially Responsible Funds: Is Good Better than the Great? (September 22, 2017). 2018 Academic Research Colloquium for Financial Planning and Related Disciplines, Available at SSRN: https://ssrn.com/abstract=3041711

Nandita Das

Delaware State University - Accounting and Finance Department ( email )

Dover, DE 19901
United States

Bernadette Ruf

Delaware State University - Accounting and Finance Department ( email )

Dover, DE 19901
United States

Aman Sunder

College for Financial Planning ( email )

9000 E. Nichols Ave
STE 200
Centennial, CO 80112
United States
7853176604 (Phone)

Swarn Chatterjee (Contact Author)

University of Georgia ( email )

Athens, GA 30602-3622
United States

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