Do Socially Responsible Fund Managers Really Invest Differently?

To date, research into socially responsible investment (SRI), and in particular the socially responsible investment funds industry, has focused on whether investing in SRI assets has any differential impact on investor returns. Prior findings generally suggest that, on a risk-adjusted basis, there is no difference in performance between SRI and conventional funds. This result has led to questions about whether SRI funds are really any different from conventional funds. This paper examines whether the portfolio allocation across industry sectors and the stock-picking ability of SRI managers are different when compared to conventional fund managers. The study finds that SRI funds exhibit different industry betas consistent with different portfolio positions, but that these differences vary from year to year. It is also found that there is little difference in stock-picking ability between the two groups of fund managers.     

The Investment Performance of Socially Responsible Investment Funds in Australia

Interest in the notion of the possible financial sacrifice suffered by socially responsible investment (SRI) fund investors for considering ethical, social and environmental issues in their investment decisions has spawned considerable academic interest in the performance of SRI funds. Both the Australian and international research literature have yielded largely mixed results. However, several of these studies are hampered by methodological problems which can obscure the significance of reported results, such as the use of small sample sizes, inconsistencies in the time frames selected to analyse performance and different modelling frameworks used to estimate investment returns. This study attempts to redress some of these issues by investigating the returns performance of 89 ethical funds in Australia over the period 1986–2005. Using a multi-factor CAPM model [Fama, E. F., and K. R. French (1996) J. Finance 51(1), 55] (which controls for factors such as size, book-to-market value and momentum) we find that ethical funds significantly under-perform the market in Australia, particularly in the most recent 5 years of our sample period (2000–2005). Risk adjusted returns (using Jensen’s alpha) indicate that average annual underperformance is around 1.52% in the 2000–2005 period for our sample and .88% over the whole sample period. Our results contrast with many previous studies (both Australian and international), which have not found statistically significant differences in the performance of ethical funds relative to market benchmarks and/or a matched sample of conventional funds. Stewart Jones is a Professor of Accounting with the University of Sydney, appointed in 2001. His research interests embrace credit risk modelling, capital markets research, standard setting and accounting theory. Sandra van der Laan is a lecturer in the Discipline of Accounting at the University of Sydney. Her research focuses on accounting as a social discourse and accounting as a mechanism to discharge a broad range of corporate accountabilities. Geoff Frost is an Associate Professor of Accounting at the University of Sydney. His research interests include corporate social responsibility and ethical investment. Janice Loftus is a senior lecturer in accounting at the University of Sydney. Her current research interests include financial accounting and corporate social responsibility reporting.     

Investment with a Conscience: Examining the Impact of Pro-Social Attitudes and Perceived Financial Performance on Socially Responsible Investment Behavior

This article addresses the growing industry of retail socially responsible investment (SRI) profiled mutual funds. Very few previous studies have examined the final consumer of SRI profiled mutual funds. Therefore, the purpose of this study was to, in an exploratory manner, examine the impact of a number of pro-social, financial performance, and socio-demographic variables on SRI behavior in order to explain why investors choose to invest different proportions of their investment portfolio in SRI profiled funds. An ordinal logistic regression analysis on 528 private investors revealed that two of the three pro-social variables had a positive impact on how much the consumer invested in SRI profiled funds. Moreover, there was proof of a non-altruistic motive for investing in SRI as consumers who perceive that financial return of SRI is equal or better than “regular” mutual funds, invested a greater proportion of their portfolio in SRI profiled mutual funds. Furthermore, the results showed that women and better-educated investors were more likely to invest a greater proportion of their investment portfolio in SRI. Overall, the findings indicate that both financial perceptions and pro-social attitudes are connected to consumer investment in SRI.     

How do Leading Retail MNCs Leverage CSR Globally? Insights from Brazil

In this article, we shed light on the debate about the financial performance of socially responsible investment (SRI) mutual funds by separately analyzing the contributions of before-fee performance and fees to SRI funds’ performance, and by investigating the role played by fund management companies in the determination of those variables. We apply the matching estimator methodology to obtain our results and find that in the period 1997–2005, US SRI funds had better before- and after-fee performance than conventional funds with similar characteristics. The differences, however, are driven exclusively by SRI funds run by management companies specialized in SRI. While these funds significantly outperform similar conventional funds, funds run by companies not specialized in SRI underperform their matched conventional funds. We find no significant differences in fees between SRI and conventional funds except in one case: SRI funds are cheaper than conventional funds run by the same management company.     

Green and Good? The Investment Performance of US Environmental Mutual Funds

Increased concern for the environment has increased the number of investment opportunities in mutual funds specialized in promoting responsible environmental attitudes. This article examines the performance and risk sensitivities of US green mutual funds vis-à-vis their conventional peers. We also analyze and compare this performance relative to other socially responsible investing (SRI) mutual funds. In order to implement this analysis, we apply a CAPM-based methodology and find that in the 1987–2009 period, environ- mental funds had lower performance than conventional funds with similar characteristics. However, if we focus on a more recent period (2001–2009), green funds achieved adjusted returns not significantly different from the rest of SRI and conventional mutual funds.     

Performance of Ethical Mutual Funds in Spain: Sacrifice or Premium?

There is currently much debate in the economic literature about whether ethical investment involves a financial sacrifice or premium. One of the most common methods of testing this compares the financial performance of ethical investment funds with that of other funds not considered “socially responsible” or ethical. The majority of these research studies evaluate the performance of the ethical funds according to classic measures, whereby different financial markets, in different countries and for different periods of time serve as reference for evaluation. The ultimate conclusion of all of these studies is that there are no significant differences between the performance results of one type of funds and the other. In Spain, ethical investment funds are still an incipient sector of investment. To date, the Spanish market has not been included in any type of analysis of these characteristics. Therefore the main objective of this article is to compare the financial performance of ethical investment funds to that of other funds in the Spanish retail market. We propose the aggregate type of analysis as the Spanish ethical investment funds have experienced a weaker development in comparison to those of other developed countries. In the first step we suggest the financial performance to be compared by style analysis since the asset distribution of the Spanish Social Return Investment (SRI) funds differs from the European trend. In particular, we use the multifactor regression model with style benchmarks. We found that their financial performance is in all cases superior or similar to that achieved by the rest of the funds. In the second step, to achieve a more robust and homogeneous comparison, we used the bootstrap method, comparing ethical and non-ethical fund subsamples by homogeneous groups. No significant differences between these two types of funds have been found. Thus, if we assume the positive o neutral effect of ethical investment on investor utility in the retail Spanish market the financial and social performance (FSP) of ethical funds will be, in aggregate, superior to the FSP achieved by conventional funds. In conclusion, the financial performance of ethical mutual funds in Spain is no sacrifice.     

The performance of socially responsible equity mutual funds: Evidence from Sweden

This paper presents a comprehensive analysis of socially responsible (SR) funds in Sweden by assessing fund managers' abilities and performances across different market states. These issues are analyzed at the aggregate and individual fund levels. The paper also presents several new statistical tests that allow more precise inferences about differences in performance and the variability in fund returns arising from different benchmarks. In general, SR and conventional funds perform similarly to the market. At the aggregate level, SR funds investing in Sweden and Europe perform similarly to conventional funds, while those investing globally tend to underperform. This underperformance seems to be linked with poor selectivity abilities of global SR fund managers. For individual funds, the performance of both types of funds is more similar. Most funds perform similarly in crisis periods compared to non‐crisis periods. Overall, our results are consistent with a mature market for SR investing and support the view that the similar performance of SR and conventional funds is associated with the mainstreaming of SR investment in Sweden. These findings encourage SR investing both by socially conscious investors, who wish to align their social values with their investment decisions, as well as by conventional investors, who will not be penalized by investing in these funds. We also call attention to the difficulties investors face when trying to identify funds with high social standards, considering that there is scarce information on the extent to which each fund (SR or conventional) holds stocks that comply with ethical and social criteria.     

SMEs and CSR Theory: Evidence and Implications from an Italian Perspective

This paper reviews the development of socially responsible investment (SRI) in the Spanish financial market. The year, 1997 saw the appearance in Spain of the first SRI mutual fund, but it was not until late 1999, that major Spanish fund managers offered SRI mutual funds on the retail market. The development of SRI in the Spanish financial market has not experienced the high levels of development seen in other European countries, such as France or Italy, where interest in SRI began during the same period. This paper presents an analysis of the impact of SRI mutual funds managed by Spanish fund managers comparing the evolution of managed assets and number of investors. We also analyse the investment strategies adopted by these funds, which mainly use negative screening criteria and the participation of non-governmental organisations as institutional investors. An analysis of the take up of socially responsible investment in the Spanish financial market shows majors deficits in this process. This is due to Spanish investors having limited sensitivity to social issues and knowledge of SRI, and a lack of development of SRI investment strategies, such as engagement or shareholder activism by fund managers. Furthermore, the take-up of SRI mutual funds in the Spanish financial market coincided with a fall in the stock market at the beginning of the 21st Century. We conclude with an analysis of the relationship between SRI and Corporate Social Responsibility (CSR).Josep M. Lozano is currently Professor in the Department of Social Sciences at ESADE, Universidad Ramon Llul-URL and Director of the school’s Institute for the Individual, Corporations and Society (IPES). Co-founder of ética, Economía y Dirección (Spanish branch of the European Business Ethics Network), member of the international Editorial Board of ‚Ethical Perspectives’ and member of the Business Ethics inter-faculty group of the Community of European Management Schools (CEMS). He has been a highly-commended runner-up in the European division of the Beyond Grey Pinstripes Faculty Pioneer Award. Author of Ethics and Organizations. Understanding Business Ethics as a Learning Process. Dordrecht: Kluwer, 2000.Laura Albareda is a Researcher at the Institute for the Individual, Corporations and Society (IPES), ESADE, Universidad Ramon Llull-URL. She is manager of the Observatory on Ethical, Ecological and Social Investment funds in Spain, an annual IPES publication on Socially Responsible Investment in Spain. Fields of research and academic interest are Corporate Social Responsibility, Business Ethics, Global Governance, Governments and Public Policies on CSR and Socially Responsible Investment.M. Rosario Balaguer is a Lecturer in the Department of Finance and Accounting at Universitat Jaume I. Research areas focus on finance-based analysis of Corporate Social Responsibility and Socially Responsible Investment, covering issues such as profitability, risk and performance. She has taken part in several national and international conferences and published a number of articles in this field.     

Psychological Capital: Impacts on Asset Management

Drawing together the areas of behavioral finance and positive psychology, the present research sought to investigate whether the psychological capital of investment fund managers is associated with fund performance in a context of financial instability. The theoretical propositions were presented and evaluated empirically through primary data on investment fund manager profiles and secondary data on the cumulative stock fund returns. The results indicate that funds managed by managers with greater resilience and optimism obtained a higher return than the mean profitability in a period of market instability.     

How Can a Ratings-based Method for Assessing Corporate Social Responsibility (CSR) Provide an Incentive to Firms Excluded from Socially Responsible Investment Indices to Invest in CSR?

Socially Responsible Investment (SRI) indices play a major role in the stock markets. A connection between doing good and doing well in business is implied. Leading indices, such as the Domini Social Index and others, exemplify the movement toward investing in socially responsible corporations. However, the question remains: Does the ratings-based methodology for assessing corporate social responsibility (CSR) provide an incentive to firms excluded from SRI indices to invest in CSR? Not in its current format. The ratings-based methodology employed by SRI indices in their selection processes excludes many corporations by creating limited-membership lists. This received ratings-based structure is yet to offer an incentive for most of the excluded corporations to invest in improving their levels of CSR. We, therefore, ask under what circumstances a ratings-based method for assessing CSR could provide an incentive to firms excluded from SRI indices to invest in CSR. In this article, we attempt to offer a theoretical reply to this question. We show that when all firms are publicly ranked according to SRI index parameters, such indices can indeed create a market incentive for increased investment by firms in improving their performance in the area of social responsibility. We further show that this incentive tapers off as the amount of investment required exceeds a certain point or if the amount of payback on that investment fails to reach a certain threshold.     

Financial Markets: A Tool for Social Responsibility?

Objectives of socially responsible investment (SRI) are discussed with reference to the two main mechanisms of the SRI ‘movement’: shareholder advocacy and managed investments. We argue that in their current forms, both mechanisms lack the power to create significant corporate change. Shareholder advocacy has been largely unsuccessful to date. Even if resolutions were successful, shareholder advocacy may still be ineffective if underlying economic opportunities remain. Marketing material and investment prospectuses issued by socially responsible mutual funds (SRI funds) commonly contain the claim that, by affecting corporations' access to capital funding, SRI funds can change corporate practices. This paper makes a contribution by presenting the market share of SRI funds in the regions where they are most developed, being Europe, the U.S. and Australia, to show that this claim is unlikely to eventuate. SRI funds also commonly claim that they will outperform conventional active mutual funds. That the economic performances of both are similar might be explained by their similar portfolio compositions. The paper makes an innovation in the SRI literature by adopting a legitimacy framework to explain the continued presence of SRI funds. To achieve desired social and environmental outcomes, SRI funds are urged to address issues at a more systemic level. A suggested mechanism is the collective lobbying of corporations and, especially, governments.     

Socially Responsible Investing: A Critical Appraisal

This paper makes three important points regarding socially responsible investing. First, the current methodology involving SRI fund divestiture of the securities of firms that engage in socially irresponsible activity often results in unacceptable unintended consequences. Second, in many cases the proper methodolgy for SRI funds may be purposely to include the securities of such firms in the portfolio in an effort to internalize socially irresponsible interfirm spillovers. Finally, that SRI fund managers may be able to bond their performance by organizing as closed-end funds subject to takeover and liquidation if the stated socially responsible objectives are not met.     

基金投资风格一致性及其对基金绩效的影响

以2004年2月27日之前上市的29只开放式股票型基金为样本,采用RSA风格分析方法,对投资风格进行静态分析和滚动分析,并设计投资风格一致性指标,考察中国开放式股票型基金的实际投资风格,以及投资风格一致性对基金绩效的影响。研究发现:中国证券投资基金实际投资风格与其所宣称的投资风格不匹配;在行情上升阶段,投资风格一致性高的基金绩效优于投资风格一致性低的基金,而在行情下降阶段则不存在显著差异。     

The "Ethics" of Ethical Investing

There appears to be an implicit assumption by those connected with the ethical investment movement (e.g., ethical investment firms, individual investors, social investment organizations, academia, and the media), that ethical investment is in fact ethical. This paper will attempt to challenge the notion that the ethical mutual fund industry, as currently taking place, is acting in an ethical manner. Ethical issues such as the transparency of the funds and advertising are discussed. Ethical mutual fund screens such as tobacco, alcohol, gambling, and the military are preliminarily examined to better determine whether they can actually be defined as "ethical" screens as opposed to merely social, political, or religious screens. A code of ethics for ethical investment is constructed by which ethical mutual fund firms can be audited for ethical compliance.     

Australian Socially Responsible Funds: Performance,Risk and Screening Intensity

We investigate the performance and risk of Socially Responsible Investment (SRI) equity funds in the Australian market and find no significant difference between the returns of SRI and conventional funds. In an extension to prior literature, we examine the impact of the number of positive, negative and total screens funds impose on performance and risk. We find little evidence of positive or negative screening impacting total return, but find weak evidence that funds with more screens overall provide better risk-adjusted performance. Positive screening significantly reduces funds’ risk. However, negative screening significantly increases risk and reduces funds’ abilities to form diversified portfolios.     

Hedge Fund Performance and Manager Skill

Using data on the monthly returns of hedge funds during the period January 1990 to August 1998, we estimate six‐factor Jensen alphas for individual hedge funds, employing eight different investment styles. We find that about 25% of the hedge funds earn positive excess returns and that the frequency and magnitude of funds' excess returns differ markedly with investment style. Using six‐factor alphas as a measure of performance, we also analyze performance persistence over 1‐year and 2‐year horizons and find evidence of significant persistence among both winners and losers. These findings, together with our finding that hedge funds that pay managers higher incentive fees also have higher excess returns, are consistent with the view that fund manager skill may be a partial explanation for the positive excess returns earned by hedge funds. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:1003–1028, 2001     

Measuring Investors’ Socially Responsible Preferences in Mutual Funds

The aim of this study is to analyze investor behavior towards socially responsible mutual funds. The analysis is based on an experimental study where a sample of individuals takes investment decisions under different parameters of information about the investment alternatives and expected returns. In the experiment, each participant decides how to distribute an investment budget between two funds, returns on which are uncertain and change over time. Two treatments are conducted, each providing a different degree of information on the socially responsible (SR) character of one of the two investment alternatives. The results obtained suggest that although individuals’ criteria for investment are essentially guided by returns and diversification, participants invest significantly more in a fund when they are explicitly informed about its SR nature. In particular, participants who declare being concerned about SR actually invest significantly more in the SR alternative. Furthermore, the level of SR faithfulness among a small group of investors is such that they invest the main share of their budget in the SR fund, even when the return differential is highly unfavorable. Providing clear information about the SR characteristics of an investment is crucial to help investors express their preferences.     

The Missing Dynamic: Corporations, Individuals and Contracts

In this article we discuss whether it pays to invest ethically. Our aim is to examine corporate social responsibility from philosophical, moral and practical points of views. We focus on two main issues related to ethical investments. Firstly we discuss the moral dilemma of how capitalism has changed its shape in today’s world and from ‘blaming the business’ there is a general attempt to use the markets to promote ethics values and corporate social responsibility. Secondly, we analyze the growth of ethical investment funds in the UK today, and their performance, and highlight some of the institutional investors involved in the management of ethical funds. We discuss whether ethical investments really succeed in reducing the conflict between profit-making and social responsibility as they promise or whether they use commercial rhetoric and market mechanism to merely sell us our own perceived values back. We conclude that the paper has a key contribution in setting the scene for future research in an area that is evolving and of fundamental importance to companies, investors and various stakeholder groups.     

National culture and socially responsible fund flows

We investigate the impact of national culture on socially responsible investment (SRI) fund flows. Drawing on prior literature suggesting that non-financial attributes and social preferences explain SRI decisions, we hypothesize that cultural traits may drive SRI fund flows. We use a dataset covering mutual funds from 45 countries over the period 1997 to 2019. Our results reveal that higher SRI flows are associated with low masculinity and uncertainty avoidance and, to a lesser extent, to high religiosity.On the contrary, power distance and individualism affect conventional fund flows but do not have any significant differential effect on ethical money flows.     

私人股权基金投资业绩研究

私人股权投资已经成为近几年资本市场上最具争议的投资明星,然而在本轮东亚地区尤其是中国的私人股权投资的热潮中,并非所有的私人股权基金都取得了满意的业绩。利用来自Private Equity Intelligence的基金业绩数据,对目前投资于中国及周边地区的私人股权基金的表现进行实证分析,研究影响私人股权基金业绩的主要因素,并对其中的因素之——投资期和退出期的划分情况进行确定。