Sustainability-themed mutual funds: an empirical examination of risk and performance

Ielasi, Federica; Rossolini, Monica; Limberti, Sara

doi:10.1108/jrf-12-2016-0159

Cited by 94 publications

(18 citation statements)

References 38 publications

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“…Ceteris paribus, we expect (1) lagging sustainability corporations to be the most shunned by ethical investors, (2) average performing firms to be held by a fraction of SRI portfolios and (3) the stocks of leading firms to be included in all ethical portfolios. These intuitions are supported by theoretical equilibrium models (Dam and Scholtens, 2015;Heinkel et al, 2001;Pedersen et al, 2021), the positive relationship between investor ownership and firms' sustainability performance (Graves and Waddock, 1994) and observed heterogeneity in responsible investment's standards (Barnett and Salomon, 2006;Capelle-Blancard and Monjon, 2014;Ielasi et al, 2018)…”

Section: Hypothesis Developmentmentioning

confidence: 82%

“…Given that the ESG leading lagging spread should display a positive relationship with the amount of socially conscious investors (Heinkel et al, 2001), these regional specificities may also play an important role. Furthermore, screening has been shown to be heterogeneously performed (Barnett and Salomon, 2006;Ielasi et al, 2018). We thus contend that some sectors exhibit higher public scrutiny and should be most often screened by ethical market participants.…”

Section: Discussionmentioning

confidence: 96%

“…However, the objectives of SRI funds, and implicitly ethical market participants, have been shown to be heterogenous (Sparkes and Cowton, 2004). Indeed, these peculiar investors have exhibited inconsistent screening standards (Barnett and Salomon, 2006;Ielasi et al, 2018). As introduced by Pedersen et al (2021), SRI market participants could be segmented into ESG-aware and ESGmotivated investors.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

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Short- and long-term effects of responsible investment growth on equity returns

Ferrat¹,

Daty²,

Burlacu

2021

JRF

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PurposeThe growth of socially responsible assets has been exponential over the last decade, they now account for almost a third of professional investments. As the growth persists, faith and conviction investors reshape the equity markets. To fully comprehend the impact of socially conscious participants on security returns, this paper attempts to provide insights on how responsible investment growth has impacted the returns of sustainable stocks. The examination is split by investment horizon to account for short and long effects.Design/methodology/approachUsing an exclusive dataset of non-financial ratings, provided by MSCI ESG research, the authors examine the cross-sectional returns of US and European sustainability-leading and lagging corporations between 2007 and 2019. Panel models robust to country, firm-year and industry effects were then employed to examine the impact of responsible investment growth on future stock returns.FindingsThe authors find evidence that the impact of responsible investment growth is dual contingent upon the timeframe considered. In the short run, sustainability-leading and lagging firms display similar stock returns. However, the spread in returns is negative over long horizons and increasing over time.Originality/valueThe examination performed in this study highlights the significant effect of responsible investment growth on future stock returns. Overall, the authors’ findings are consistent with the price pressure hypothesis in the short run and the cost of capital alteration over longer horizons.

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Section: Hypothesis Developmentmentioning

confidence: 82%

Section: Discussionmentioning

confidence: 96%

Section: Hypothesis Developmentmentioning

confidence: 99%

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Short- and long-term effects of responsible investment growth on equity returns

Ferrat¹,

Daty²,

Burlacu

2021

JRF

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“…Keefe [33,34] proved in his research that green investments are better defined and not as restrictive as socially responsible investments (SRIs). Ielasi and Rossolini [35,36] assessed STI and themed investment portfolios (themed investment in companies whose goal was not environmental protection) and classical SRI portfolios. They proved that the efficiency of ST funds adjusted for risk is related more to their responsible character than the thematic approach as such.…”

Section: Literature Reviewmentioning

confidence: 99%

Valuation of the Environmental Effects of Socially Responsible Investments in Europe

Janik

Maruszewska

2020

Sustainability

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This paper evaluated the environmental effects of socially responsible investments (SRIs) in European countries and analyzed the differentiation between them in terms of SRIs and selected features in the environmental dimension. The first section of the paper discusses contemporary trends in Europe and in certain European countries, whilst the second compares SR environmental investments and environmental factors in selected European countries from a multidimensional perspective. The aim of the study was to identify and evaluate these trends as well as to find similarities and differences between European countries, and subsequently to indicate groups of countries with similar approaches to pro-ecological investments. In order to solve the problem, descriptive and multidimensional statistical methods were used, namely correspondence analysis (CA). Although the research results clearly revealed upward tendencies in the volume of SR environmental investments in the analyzed period, they nonetheless represent a relatively low share in the total number of socially responsible investments. The overall growth in SRIs in Europe may have resulted from the more intense activities of policymakers in some countries as a consequence of concluding agreements reached during the 21st Conference of the Parties (COP21) in 2015. The results of the study also revealed no significant correlations between SR environmental investments and environmental variables among the European countries analyzed; hence, there is no substantial evidence that investors’ assets contribute to the improvement of the environment.

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“…Academic literature suggests that socially responsible investment (SRI) is the most used term (Bello, 2005;Derwall et al, 2005;Eccles et al, 2011;Haigh & Hazelton, 2004;Juravle & Lewis, 2008;Kinder, 2005;Renneboog et al, 2008;Sparkes & Cowton, 2004;Vandekerckhove et al, 2007). The other terms used to describe investing practice that integrates non-financial information include ethical investing (Sparkes, 2001), green investing (Heinkel, Kraus, & Zechner, 2001), the triple bottom line (Rubinstein, 2003), value-based investing (Fehrenbacher, 2001), sustainability-themed investing ( (Ielasi, Rossolini, & Limberti, 2018), and ESG integration (Hanson, 2013;Kevin, 2013; van Duuren et al, 2016).…”

Section: Ambiguitymentioning

confidence: 99%

Challenges for Responsible Investment in the retirement benefits sector of Kenya

Mathenge¹

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Responsible investment (RI) is the investment strategy that incorporates environmental, social and governance (ESG) factors into the investment decision-making process (Hebb, Hawley, Hoepner, Neher, & Wood, 2015). RI has shifted from what was considered a niche market to become one of the fastest-growing areas of finance in many parts of the world (PRI, 2019b). However, a closer look at the development of RI and adoption rates in countries and regions reveals that RI is not commonly practised in sub-Sahara Africa (except for South Africa). This study explores the critical challenges for RI development in the retirement benefits sector of Kenya and, by engaging with a variety of key stakeholders, proposes how to overcome the identified challenges. It contributes to the literature on challenges for RI in a developing country by offering an in-depth case study of the retirement benefits sector. My study employs qualitative methods to collect and analyse data collected from semi-structured interviews with 22 participants (asset managers, regulators and capital market experts, and a council member of the Association of Retirement Benefits Schemes of Kenya) as well as a collection of published documents by government agencies in Kenya. Also, I analysed 10 annual reports to assess the kind of ESG information that is disclosed by listed companies. My study explores, in particular, how actors in the retirement benefits sector conceptualise RI. It identifies the leading ESG factors in Kenya and draws on the business-case approach to RI to explore whether the participants consider those factors as material risk factors that present both risks and opportunities to the investment decision-making process. Further, my study identifies the specific barriers for RI development and proposes how to overcome them. The findings show that participants define RI using several terminologies. This is consistent with the existing literature. My study finds that all participants consider corporate governance as a material risk factor that can impact the financial returns of a portfolio. However, most of the asset managers do not think that the environmental and social factors can present material risk factors to their investment decision-making process. Although over a third of the asset managers recognise that the environmental and social issues in Kenya present business opportunities to retirement benefits schemes, there is a shortage of well-structured assets in those areas. Further, this study identifies five specific barriers for RI development: diversification challenges; a lack of ESG data; a lack of demand/incentives; short-termism; and the demand for high financial returns and a lack of awareness and expert knowledge of RI practices. My study recommends that the National Treasury of Kenya develops RI policy for the entire finance sector. In addition, the findings support a recommendation for the Capital Markets Authority and the Retirement Benefits Authority to embark on capacity building programmes to educate the actors in the finance sector on RI strategies and to create awareness of the impact of ESG on financial returns in the long run.

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Sustainability-themed mutual funds: an empirical examination of risk and performance

Cited by 94 publications

References 38 publications

Short- and long-term effects of responsible investment growth on equity returns

Short- and long-term effects of responsible investment growth on equity returns

Valuation of the Environmental Effects of Socially Responsible Investments in Europe

Challenges for Responsible Investment in the retirement benefits sector of Kenya

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