Assessing SRI fund performance research: Best practices in empirical analysis

Abstract

We review the socially responsible investment (SRI) mutual fund performance literature to provide best practices in SRI performance attribution analysis. Based on meta-ethnography and content analysis, five themes in this literature require specific attention: data quality, social responsibility verification, survivorship bias, benchmarking, and sensitivity and robustness checks. For each of these themes, we develop best practices. Specifically, for sound SRI fund performance analysis, it is important that research pays attention to dividend yields and fees, incorporates independent and third party social responsibility verification, corrects for survivorship bias and tests multiple benchmarks, as well as analyzing the impact of fund composition, management influences and SRI strategies through sensitivity and robustness analysis. These best practices aim to enhance the robustness of SRI financial performance analysis. Copyright (C) 2011 John Wiley & Sons, Ltd and ERP Environment.mutual funds , socially responsible investing , performance evaluation , best practices ,

Fossil Fuel Divestment Strategies: Financial and Carbon-Related Consequences

“…These studies report mixed results. Some of them suggest that SRI performs similar to conventional investment (Barnett & Salomon, 2003;Chegut, Schenk, & Scholtens, 2011;Louche, 2001) because the applied environmental, social, and governance criteria correlate with financial criteria or because the use of environmental, social and governance (ESG) criteria does not decrease the variance of the investment universe. Other studies argue, based on a portfolio theory perspective (Markowitz, 1952), that SRI has a lower financial performance than conventional investments because of a reduction of the investment universe.…”

Comparing those who do, might and will not invest in sustainable funds: a survey among German retail fund investors

“…Although many studies concerning the performance of equity SR funds have already been conducted and several reviews (e.g., Chegut et al (2011), Rathner (2013, von Wallis and Klein (2014)) have been written, no significant under-or outperformance compared to conventional investments has been proven. But often the subjective assessment fairly differs from the objective one.…”

“…When the performance of SR and conventional retail funds domiciled in Germany are compared, no significant underperformance of SR funds can be found (Cortez et al 2009(Cortez et al , 2012Renneboog et al 2008;Kreander et al 2005;Bauer et al 2005;Schröder 2004;Kreander et al 2002)). Globally, there are more than 100 studies concerning the performance of SR funds (e.g., Chegut et al 2011;Rathner 2013;von Wallis and Klein 2014). Capelle-Blancard and Monjon (2012) point out that ''maybe too much attention has been paid to this issue''.…”

Performance and performance persistence of socially responsible investment funds in Europe and North America

“…However, an SRI portfolio represents a less diversified portfolio due to the screening process during portfolio formation. Therefore, an SRI portfolio is deemed to be a risky investment portfolio (Chegut et al 2011). …”