Equity SRI funds vacillate between ethics and money: An analysis of the funds’ stock holding decisions

Joliet, Robert; Titova, Yulia

doi:10.1016/j.jbankfin.2018.09.011

Cited by 97 publications

(47 citation statements)

References 32 publications

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“…Economic performance makes firms obtain more capital from investment. The sustainable investor fund's asset allocation decisions are driven by economic performance and corporate governance [4,40]. Lastly, market risks and economic performance are interrelated.…”

Section: Theoretical Implicationsmentioning

confidence: 99%

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Sustainable Investment: Interrelated among Corporate Governance, Economic Performance and Market Risks Using Investor Preference Approach

et al. 2019

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Prior studies are lacking on the drivers of sustainable investment. Hence, this study examines the relationship between the social aspects, environmental aspects, economic benefits, market conditions, and corporate governance issues on sustainable investment. Sustainable investment has been rising since the last decade. However, sustainable investment is preceded by ethical investment, green investment, and socially responsible investment. In order to understand the sustainability of an investment before decision-making, it proposed a set of attributes to measure its sustainability using investor’s linguistics preferences. The proposed attributes are interrelated and based on investor’s linguistic preferences. The study employs the fuzzy set theory to handle the uncertainty resulting from the vagueness of linguistic terms and applies decision making trial and evaluation laboratory (DEMATEL) to determine the nature of interrelationships among sustainable investment attributes. The result indicates that corporate governance, economic performance, and market risks are the causal aspects of sustainable investment. In addition, this study found that transparency, anti-corruption, and board diversity were the two most important criteria of corporate governance. Furthermore, the three most important criteria of economic performance presented the model were excess return, market value, and shareholder loyalty. The theoretical and practical implications of sustainable investment are discussed.

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Section: Theoretical Implicationsmentioning

confidence: 99%

“…Nevertheless, low market risks will also make the market sluggish. Hence, the stability of market risks is important for sustainable investment performance in the long-term [29,40].…”

Section: Theoretical Implicationsmentioning

confidence: 99%

Sustainable Investment: Interrelated among Corporate Governance, Economic Performance and Market Risks Using Investor Preference Approach

et al. 2019

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“…Moreover, this article takes into account previous empirical evidence that has extensively employed multi-factor asset pricing models to explain the cross-sectional variation in expected returns of Socially Responsible Investments (SRI). This is the case, for instance, in the recent works of Joliet and Titova [3], who assessed the fundamental characteristics of SRI funds using the Fama-French five-factor model [4], finding that screening criteria guide investment decisions, or Sokolovska and Kešeljević [5] who found both overperformance and underperformance in the 2 of 16 regional Dow Jones Sustainability Indexes over the period 2006-2016 and stated that renewable energy indices are financially unattractive; however, to the best of our knowledge there is no empirical evidence on SDG assets employing this methodology. Moreover, this article follows the line of Sarwar et al [6], who proposed estimating this five-factor model using a rolling window and then developing a long-only or a long-short trading strategy where the signals are provided by the model's alpha that represents the risk-adjusted expected return.…”

Section: Introductionmentioning

confidence: 83%

“…To that end, researchers have employed multi-factor asset pricing models such as the Fama-French three-factor model [20] and the Carhart four-factor model [21] as well as the more recent Fama-French five-factor model [4]. These are of the works of Goldreyer and Diltz [22], Cummings [23], Bello [24], Bauer et al [25], Gregory and Whittaker [26], Jones et al [27], Cortez et al [28], Humphrey and Lee [29], Capelle and Monjon [30], Nofsinger and Varma [31], Lean et al [32], Leite and Cortez [33], Jin and Han [34] Joliet and Titova [3], Segura et al [15], Boermans and Galema [35], Martí-Ballester [36] and Martí-Ballester [37], among others.…”

Section: Literature Reviewmentioning

confidence: 92%

“…He found that the five-factor model outperformed the three-factor one in Eastern Europe and Latin America but failed in the Asian region. From an SRI perspective, the works of Joliet and Titova [3] and Sokolovska and Kešeljević [5] also employed this five factor model in order to analyses the performance of different SRI funds an indices, respectively. On the other hand, Mohanty [57] tested different asset models on 22 developed markets and 21 emerging markets and pointed out that each market is unique in its composition and trend, and hence, a generalized approach cannot be adopted across all the markets.…”

Section: Methodsmentioning

confidence: 99%

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Sustainable Development Goals and Investment Strategies: The Profitability of Using Five-Factor Fama-French Alphas

Miralles‐Quirós

Nogueira

2020

Sustainability

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This study focuses on assets related to Sustainable Development Goals (SDGs), which are the most recent aspect of the Socially Responsible Investment framework and have caught the attention of investors due to their investment opportunities as well as the global challenges that can be achieved. The profitability of developing an investment strategy is shown based on the value of the alphas obtained from the estimation of the Fama-French five-factor model when compared to an equally weighted portfolio, even when transaction costs are taken into consideration. In addition, it is proven that investors should focus their investments on two main SDGs: Good health and well-being (Goal 3) and Industry, innovation and infrastructure (Goal 9).

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Looking for sustainable development: Socially responsible mutual funds and the low‐carbon economy

et al. 2020

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Sustainable investment responds to demands for carbon and climate-neutral societies. To address the urgency around climate change and provide investors with more qualified information, Morningstar has developed the Low Carbon Designation (LCD) to indicate that the companies held in a portfolio are in general alignment with the transition to a low-carbon economy. The designation is given to portfolios that have low carbon risk and fossil fuel exposure scores. The present study builds on the LCD by examining the relationship between these scores and financial performance. With this aim, we analyze 3920 socially responsible mutual funds from across the world.Results show differences in financial performance according to scores and investment areas. We find evidence that funds considered to have higher levels of sustainability achieved better performance than funds with higher exposure to companies involved in carbon and fossil fuel industries. We provide insights on the informativeness of these new scores with a focus on climate change and their relevance in helping investors to identify climate-aware funds. This study highlights the importance of introducing strategies to develop green finance; the analysis confirms that sustainability improves performance. Finally, the LCD indicator is shown to be relevant for making fairer comparisons among socially responsible funds and, ultimately, for developing low-carbon economies.

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Equity SRI funds vacillate between ethics and money: An analysis of the funds’ stock holding decisions

Cited by 97 publications

References 32 publications

Sustainable Investment: Interrelated among Corporate Governance, Economic Performance and Market Risks Using Investor Preference Approach

Sustainable Investment: Interrelated among Corporate Governance, Economic Performance and Market Risks Using Investor Preference Approach

Sustainable Development Goals and Investment Strategies: The Profitability of Using Five-Factor Fama-French Alphas

Looking for sustainable development: Socially responsible mutual funds and the low‐carbon economy

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