CEPII, Recherche et Expertise sur l'economie mondiale
The Performance of Socially Responsible Funds: Does the Screening Process Matter?

Gunther Capelle-Blancard
Stéphanie Monjon

 Highlights :

 Abstract :
This paper is about the financial performance of mutual funds that practice Socially Responsible Investing (SRI). First, we measure the financial performance of a sample of 116 French SRI mutual funds over the period 2004-2007. As expected, and according to previous studies, our results show that SRI funds do not outperform the market, whatever the performance measure considered. Then, we assess the financial performances within our sample of SRI funds, as suggested by Barnett and Salomon (2006). Precisely, we examine whether the financial performances of these funds are related to the features of the SRI selection process. We find evidence that a greater screening intensity reduces SRI financial performance, but the relationship runs in the opposite direction when screening gets tougher. Further, we show that only sectoral screens – such as avoiding “sin” stocks – decrease financial performance, while transversal screens – commitment to UN Global Compact Principles, ILO/Rights at Work, etc. – have no impact. Other characteristics of the screening process like shareholder activism, or the overall quality of the SRI process do not have any significant impact either.

 Keywords : Socially Responsible Investing (SRI) | Sustainable and Responsible Investment | Ethical Investment | Corporate Social Responsibility (CSR) | Portfolio Choice | Ratings

 JEL : G11, Q56, C32
CEPII Working Paper
N°2011-12, May 2011

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 Fields of expertise

Money & Finance