Socially Responsible Investments: Methodology, Risk and Performance

L.D.R. Renneboog, J.R. Ter Horst, C. Zhang

Research output: Working paperDiscussion paperOther research output

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Abstract

This paper surveys the literature on socially responsible investments (SRI). Over the past decade, SRI has experienced an explosive growth around the world. Particular to the SRI funds is that both financial goals and social objectives are pursued. While corporate social responsibility (CSR) - defined as good corporate governance, sound environmental standards, and good management towards stakeholder relations - may create value for shareholders, participating in other social and ethical issues is likely to destroy shareholder value. Furthermore, the risk-adjusted returns of SRI funds in the US and UK are not significantly different from those of conventional funds, whereas SRI funds in Continental Europe and Asia-Pacific strongly underperform benchmark portfolios. Finally, the volatility of money-flows is lower in SRI funds than of conventional funds, and SRI investors’ decisions to invest in an SRI fund are less affected by management fees than the decisions by conventional fund investors.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages47
Volume2007-31
Publication statusPublished - 2007

Publication series

NameCentER Discussion Paper
Volume2007-31

Fingerprint

Socially responsible investment
Methodology
Investment funds
Investors
Management fees
Stakeholder relations
Corporate governance
Shareholder value
Social issues
Money flows
Benchmark portfolio
Ethical issues
Asia-Pacific
Risk-adjusted returns
Corporate Social Responsibility
Shareholders
Environmental standards

Keywords

  • socially responsible investments
  • ethical investing
  • corporate social responsibility
  • mutual funds
  • performance evaluation
  • money-flows
  • investment screens

Cite this

Renneboog, L. D. R., Ter Horst, J. R., & Zhang, C. (2007). Socially Responsible Investments: Methodology, Risk and Performance. (CentER Discussion Paper; Vol. 2007-31). Tilburg: Finance.
Renneboog, L.D.R. ; Ter Horst, J.R. ; Zhang, C. / Socially Responsible Investments : Methodology, Risk and Performance. Tilburg : Finance, 2007. (CentER Discussion Paper).
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abstract = "This paper surveys the literature on socially responsible investments (SRI). Over the past decade, SRI has experienced an explosive growth around the world. Particular to the SRI funds is that both financial goals and social objectives are pursued. While corporate social responsibility (CSR) - defined as good corporate governance, sound environmental standards, and good management towards stakeholder relations - may create value for shareholders, participating in other social and ethical issues is likely to destroy shareholder value. Furthermore, the risk-adjusted returns of SRI funds in the US and UK are not significantly different from those of conventional funds, whereas SRI funds in Continental Europe and Asia-Pacific strongly underperform benchmark portfolios. Finally, the volatility of money-flows is lower in SRI funds than of conventional funds, and SRI investors’ decisions to invest in an SRI fund are less affected by management fees than the decisions by conventional fund investors.",
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Renneboog, LDR, Ter Horst, JR & Zhang, C 2007 'Socially Responsible Investments: Methodology, Risk and Performance' CentER Discussion Paper, vol. 2007-31, Finance, Tilburg.

Socially Responsible Investments : Methodology, Risk and Performance. / Renneboog, L.D.R.; Ter Horst, J.R.; Zhang, C.

Tilburg : Finance, 2007. (CentER Discussion Paper; Vol. 2007-31).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Socially Responsible Investments

T2 - Methodology, Risk and Performance

AU - Renneboog, L.D.R.

AU - Ter Horst, J.R.

AU - Zhang, C.

N1 - Subsequently published in Journal of Banking & Finance, 2008 (rt) Pagination: 47

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AB - This paper surveys the literature on socially responsible investments (SRI). Over the past decade, SRI has experienced an explosive growth around the world. Particular to the SRI funds is that both financial goals and social objectives are pursued. While corporate social responsibility (CSR) - defined as good corporate governance, sound environmental standards, and good management towards stakeholder relations - may create value for shareholders, participating in other social and ethical issues is likely to destroy shareholder value. Furthermore, the risk-adjusted returns of SRI funds in the US and UK are not significantly different from those of conventional funds, whereas SRI funds in Continental Europe and Asia-Pacific strongly underperform benchmark portfolios. Finally, the volatility of money-flows is lower in SRI funds than of conventional funds, and SRI investors’ decisions to invest in an SRI fund are less affected by management fees than the decisions by conventional fund investors.

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KW - ethical investing

KW - corporate social responsibility

KW - mutual funds

KW - performance evaluation

KW - money-flows

KW - investment screens

M3 - Discussion paper

VL - 2007-31

T3 - CentER Discussion Paper

BT - Socially Responsible Investments

PB - Finance

CY - Tilburg

ER -

Renneboog LDR, Ter Horst JR, Zhang C. Socially Responsible Investments: Methodology, Risk and Performance. Tilburg: Finance. 2007. (CentER Discussion Paper).