The Eco-Efficiency Premium Puzzle

Posted: 5 May 2005

See all articles by Jeroen Derwall

Jeroen Derwall

Maastricht University - European Centre for Corporate Engagement; Maastricht University - Department of Finance; Utrecht University - School of Economics

Rob Bauer

Maastricht University; European Centre for Corporate Engagement (ECCE)

Nadja Guenster

University of Muenster - Finance Center Muenster; University of California, Berkeley

Kees C. G. Koedijk

Tilburg University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Abstract

Does socially responsible investing (SRI) lead to inferior or superior portfolio performance? This study focused on the concept of eco-efficiency, which can be thought of as the economic value a company creates relative to the waste it generates, and found that SRI produced superior performance. Based on Innovest Strategic Value Advisors' corporate eco-efficiency scores, the study constructed and evaluated two equity portfolios that differed in eco-efficiency. The high-ranked portfolio provided substantially higher average returns than its low-ranked counterpart over the 1995-2003 period. This performance differential could not be explained by differences in market sensitivity, investment style, or industry-specific factors. Moreover, the results remained significant for all levels of transaction costs, suggesting that the incremental benefits of SRI can be substantial.

Keywords: Portfolio Management, Equity Strategies, Performance Measurement and Evaluation, Performance Measurement, Corporate Governance

Suggested Citation

Derwall, Jeroen and Derwall, Jeroen and Bauer, Rob and Guenster, Nadja and Koedijk, Kees G., The Eco-Efficiency Premium Puzzle. Financial Analysts Journal, Vol. 61, No. 2, pp. 51-63, March/April 2005, Available at SSRN: https://ssrn.com/abstract=713861

Jeroen Derwall (Contact Author)

Maastricht University - European Centre for Corporate Engagement ( email )

FEBA
Tongersestraat 53
Maastricht, Limburg 6200MD
Netherlands

HOME PAGE: http://www.corporate-engagement.com/

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

HOME PAGE: http://www.fdewb.unimaas.nl/finance/?page=member&id=175

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

Rob Bauer

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands
+31 43 3883871 (Phone)

European Centre for Corporate Engagement (ECCE) ( email )

Tongersestraat 53
Maastricht, 6211LM
Netherlands

Nadja Guenster

University of Muenster - Finance Center Muenster ( email )

Universitatsstr. 14-16
Muenster, 48143
Germany

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Kees G. Koedijk

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 4663048 (Phone)
+31 13 4662052 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
2,619
PlumX Metrics