Socially responsible investment fund performance: the impact of screening intensity

Lee, Darren D.; Humphrey, Jacquelyn E.; Benson, Karen L.; Ahn, Jason Y. K.

doi:10.1111/j.1467-629x.2009.00336.x

Cited by 127 publications

(106 citation statements)

References 41 publications

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“…Other studies point more attention on the systematic risk related to SRI fund performance. Lee, Humphrey, Benson and Ahn (2010) confirm that the number of screens negatively impacts performance, but also results in lower systematic risk. Humphrey and Lee (2012) provide a weak evidence that screening intensity increases (instead of decreases) risk-adjusted performance.…”

Section: Hypothesessupporting

confidence: 53%

Cherry Picking or Depth-Oriented Strategic Investing? Evidence from SRI Activity

Russo¹,

Mariani²,

Perrini³

2016

IJBM

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Today, socially responsible investing (SRI) represents the youngest financial-services industry that investors can exploit to implement their investment strategies. Although literature in this field is growing, additional research is needed to disentangle the factors affecting the performance of SRI funds. This paper focuses on the analysis of the influence that the depth of investment strategy by SRI funds may have on the investment performance, whereas larger SRI funds have a stronger capacity to address their investment choices. We used a sample of 149 USA SRI funds referring to the Social Investment Forum (SIF) Foundation in the period 2005-2010. We found that depth of investment strategy decreases the capacity of large SRI funds to reach positive financial returns if a broad sustainability investment strategy is pursued. On the other hand, SRI funds able to focus the attention on specific environmental, social, governance, or product criteria do increase their capacity to reach positive financial performance. This paper contributes to the existing literature by examining the depth of the sustainability investment strategy by SRI funds and investigating the moderating effect that peculiar investment strategies have on the well-known relation between size and performance of SRI funds.

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Section: Hypothesessupporting

confidence: 53%

Cherry Picking or Depth-Oriented Strategic Investing? Evidence from SRI Activity

Russo¹,

Mariani²,

Perrini³

2016

IJBM

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“…A stream of the literature that overcomes this criticism comprises studies that analyse the performance of SRI mutual funds that apply exclusionary screens (Barnett and Salomon 2006;Renneboog et al 2008b;Lee et al 2010;Renneboog et al 2011;Humphrey and Lee 2011;CapelleBlancard and Monjon 2014;Humphrey and Tan 2014). In 10 In the Report from the Graver Committee it explicitly says that ''there is no consensus on one particular uniform ethical perspective''.…”

Section: Performance Effects Of Exclusionary Screeningmentioning

confidence: 99%

On the Price of Morals in Markets: An Empirical Study of the Swedish AP-Funds and the Norwegian Government Pension Fund

Hoepner

Schopohl

2016

J Bus Ethics

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This study empirically analyses the exclusion of companies from investors' investment universe due to a company's business model (sector-based exclusion) or due to a company's violations of international norms (normbased exclusion). We conduct a time-series analysis of the performance implications of the exclusion decisions of two leading Nordic investors, Norway's Government Pension Fund-Global (GPFG) and Sweden's AP-funds. We find that their portfolios of excluded companies do not generate an abnormal return relative to the funds' benchmark index. While the exclusion portfolios show higher risk than the respective benchmark, this difference is only statistically significant for the case of GPFG. These findings suggest that the exclusion of the companies generally does not harm funds' performance. We interpret these findings as indicative that with exclusionary screening, as practiced by the sample funds, asset owners can meet the ethical objectives of their beneficiaries without compromising financial returns.

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“…3 In contrast, Lee et al (2010) do not find any relationship (linear or curvilinear) between screening intensity and performance. Besides the US, Renneboog et al (2008) also include European and Asia-Pacific markets, having found that fund returns decrease with screening intensity on social and corporate governance criteria, but not on ethical, sin or environmental criteria.…”

Section: Introductionmentioning

confidence: 67%

“…Indeed, the typical approach in previous studies has involved comparing the performance of socially responsible funds as a whole relative to conventional funds, disregarding the fact that the former are not coherent in their social objectives and that not all dimensions of social responsibility are rewarded in the same way. Nevertheless, a few studies (Barnett and Salomon, 2006;Renneboog et al, 2008;and Lee et al, 2010) have tackled the type and intensity of social screens used as possible determinants of performance. Barnett and Salomon (2006) find a curvilinear relationship between the number of screens and risk-adjusted performance of US socially responsible funds.…”

Section: Introductionmentioning

confidence: 99%

Investing in Mutual Funds: Does it Pay to Be a Sinner or a Saint in Times of Crisis?

2010

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We investigate the performance of US socially responsible funds that employ different stock selection criteria: religious, social and 'irresponsible' criteria. Performance is evaluated over different market regimes using a Markov-switching conditional CAPM model that defines different states of the market endogenously. The 'irresponsible' fund outperforms in low volatility regimes, but underperforms in high volatility regimes. Furthermore, the risk of the 'irresponsible' fund is higher in low volatility regimes and lower in high volatility regimes. Socially responsible funds do not adjust risk according to market conditions. These findings suggest that socially responsible companies might provide better investments during periods of crisis. AbstractWe investigate the performance of US socially responsible funds that employ different stock selection criteria: religious, social and 'irresponsible' criteria. Performance is evaluated over different market regimes using a Markov-switching conditional CAPM approach that defines different states of the market endogenously. The 'irresponsible' fund outperforms in low volatility regimes, but underperforms in high volatility regimes. Furthermore, the risk of the 'irresponsible' fund is higher in low volatility regimes and lower in high volatility regimes. Socially responsible funds do not adjust risk according to market conditions. These findings suggest that socially responsible companies might provide better investments during periods of crisis.

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Socially responsible investment fund performance: the impact of screening intensity

Cited by 127 publications

References 41 publications

Cherry Picking or Depth-Oriented Strategic Investing? Evidence from SRI Activity

Cherry Picking or Depth-Oriented Strategic Investing? Evidence from SRI Activity

On the Price of Morals in Markets: An Empirical Study of the Swedish AP-Funds and the Norwegian Government Pension Fund

Investing in Mutual Funds: Does it Pay to Be a Sinner or a Saint in Times of Crisis?

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