1 Introduction
2 SRI development, motives, and current implementation
2.1 Historical development
2.2 Terminology
2.3 Motivation
2.4 Current implementation
2.4.1 Guideline portfolio investment
2.4.1.1 Screening approach
2.4.1.2 Best-in-class approach
2.4.2 Shareholder activism
2.4.3 Community development investing
3 Does SRI pay?
3.1 Development in academic literature
3.2 Performance of SR investments
3.2.1 SR = conventional portfolio returns
References | Sample period | Performance measurement | Benchmark | Selection of social component |
---|---|---|---|---|
Amenc and Sourd (2008) | 2002–2007 | Jensen ∝, sharpe | SBF 250 DJEuroStoxx DJ Stoxx, MSCI | Social index, ethical mutual fund |
Bauer et al. (2005) | 1990–2001 | Jensen ∝ | Worldscope market value equity index | Ethical mutual fund |
Bauer et al. (2007) | 1994–2003 | Jensen ∝, average returns sharpe Carhart’s ∝ | Candadian Stocks in Wordscope database | Ethical mutual fund |
Bauer et al. (2006) | 1992–2003 | Carhart’s ∝ | Worldscope Australia index | Ethical mutual fund |
Bello (2005) | 1994-2001 | Jensen ∝, sharpe, eSDAR | S&P 500 DSI 400 | Ethical mutual fund |
Cengiz et al. (2010) | 1991–2009 | Treynor, sharpe, eSDAR, Treynor-Black | World index Datastream | Ethical mutual fund |
Cummings (2000) | 1986–1996 | Jensen ∝, average returns Treynor sharpe | 3 Australian market based indices | Ethical mutual fund |
Guerard (1997a) | 1987–1996 | Average returns | Vantage Global Advisor 1200 Equity Index | Social index |
Hamilton et al. (1993) | 1981–1990 | Jensen ∝ | NYSE | Ethical mutual fund |
Kreander et al. (2005) | 1995–2001 | Jensen ∝, Sharpe, Treynor | No | Ethical mutual fund |
Mill (2006) | 1982–2004 | Jensen ∝ | No | Ethical mutual fund |
Sauer (1997) | 1986–1994 | Jensen ∝, Sharpe, Average returns | S&P 500 CRSP Value Weights Market Index | DSI 400 index |
Schröder (2004) | 2000–2002 | Jensen ∝, sharpe | MSCI | Social index, ethical mutual fund |
Statman (2000) | 1990–1998 | Jensen ∝, eSDAR, average returns | S&P 500 | Social index, ethical mutual fund |
Teoh et al. (1999) | 1986–1989 | Average returns | No | Analysis on companies divesting from South Africa |
3.2.2 SR < conventional portfolio returns
Study | Sample period | Performance measurement | Benchmark | Selection of social component |
---|---|---|---|---|
Geczy et al. (2005) | 1999–2001 | Sharpe | Customized benchmark | Ethical mutual funds |
Gregory et al. (1997) | 1986–1994 | Jensen ∝ | HGSCI, FTASI | Ethical mutual funds |
Kahn et al. (1997) | 1987–1996 | Total return | S&P 500 | Tobacco companies excluded from S&P 500 |
Mueller (1991) | 1984–1988 | Jensen ∝, Treynor | Vanguard index 500 | Ethical mutual funds |
Tippet (2001) | 1991–1998 | Jensen ∝, Treynor | All ordinaries accumulation index | Ethical mutual funds |
Teper (1992) | 1979–1989 | Total return | S&P 500 | Ethical mutual funds, KLD 400 index |
3.2.3 SR > conventional portfolio returns
Study | Sample period | Performance measurement | Benchmark | Selection of social component |
---|---|---|---|---|
Bragdon and Karash (2002) | 1997–2001 | Jensen ∝, CAGR | MSCI, S&P 500 | Global LAMP index |
D’Antonio et al. (1997) | 1990–1996 | Jensen ∝, average returns | LCB | KLD 400 |
D’Antonio et al. (2000) | 1990–1996 | Jensen ∝, eSDAR, average returns | S&P 500 LCB | Social index |
Derwall et al. (2005) | 1995–2003 | Jensen ∝ | No | Self-assessment of eco-efficiently ranked portfolio |
DiBartolomeo and Kurtz (1999) | 1990–1999 | Jensen ∝, Treynor | Russel 1000 | Social index |
Epstein and Schnietz (2002) | 1999 | Jensen ∝, Treynor | No | Split of Fortune 500 in environmental, labor and non-abusive firms |
Gompers et al. (2003) | 1990–1998 | Tobin’s Q | No | Construction of corporate governance index |
Grossman and Sharpe (1986) | 1960–1983 | Jensen ∝, Treynor | NYSE, S&P 500 | Construction of South Africa-free portfolio |
Hill et al. (2007) | 1995–2005 | Jensen ∝, Treynor | S&P 500, NIKKEI 225, FTSE 300 | Ethical mutual funds |
Kempf and Osthoff (2007) | 1992–2004 | Jensen ∝ | S&P 500, DSI 400 | Best-in-class approach, positive, negative screening of index |
Luther et al. (1992) | 1972–1990 | Jensen ∝, Treynor, eSDAR | FT All sharpe, MSCIP | Ethical mutual funds |
Mallin et al. (1995) | 1986–1993 | Jensen ∝, Treynor, sharpe eSDAR | No | Ethical mutual funds |
Shank et al. (2005) | 2000–2003 | Jensen ∝, Treynor | NYSE | Ethical mutual funds, fund of most valued SR firms |
Travers (1997) | 1992–1997 | Jensen ∝, average returns | MSCI EAFA | Ethical mutual funds |
3.2.4 Comparison of single companies
Study | Sample period | Performance measurement | Relation fin. perf./ethical behavior | Determination of ethical behavior |
---|---|---|---|---|
Blacconiere and Northcut (1997) | 1986 | Jensen ∝ | (+) | Environmental screening and ranking of 10-K reports |
Boyle et al. (1997) | 1986 | Jensen ∝ | (−) | Defense contract organizations who signed (ethical) defense industry initiative |
Brown (1998) | 1984–1996 | Market adjusted returns | (+) | Fortune rating on responsibility to community and environment |
Dasgupta et al. (2001) | 1990–1994 | Jensen ∝ | (+) | Positive and negative reported environmental news |
Dowell et al. (2000) | 1994–1997 | Tobin’s Q | (+) | Which environmental standards does company adhere to (a) local, (b) US, (c) global |
Edmans (2011) | 1984–2009 | Carhart’s ∝ | (+) | Employee satisfaction: 100 best companies to work for in America |
Hamilton (1995) | 1989 | Jensen ∝ | (+) | Companies reported toxic release inventories |
Hillman and Keim (2001) | 1994–1996 | Market value added | (+) (−) | Screening of KLD database with regard to social issue participation and stakeholder management |
Humphrey et al. (2012) | 2002–2010 | Jensen ∝, Average returns, Sharpe ratio, Carhart’s ∝ | No | ESG scores provided by SAM |
Jones and Murrell (2001) | 1989–1994 | Jensen ∝ | (+) | Top family-friendly companies |
Judge and Douglas (1998) | 1992–1994 | Jensen ∝, ROI, Earnings growth, Market share | (+) | Screening: are environmental issues integrated into the strategic planning process? |
Klaasen and McLaughlin (1996) | 1985–1991 | Jensen∝ | (+) | Winning an environmental award and being exposed to an environmental crisis |
Konar and Cohen (1997) | 1989–1992 | Jensen ∝ | (−) | Companies mentioned in media in relationship with toxic release inventories (TBI) |
Konar and Cohen (2001) | 1989 | Tobin’s Q | (+) | Aggregated pounds of toxic chemicals and number of environmental lawsuits pending against the firm |
Ogden and Watson (1999) | 1991–1997 | Relative returns | (+) | Customer satisfaction |
Verschoor (1998) | 1996 | Ranking financial perf. | (+) | Commitment to ethical behavior |
Waddock and Graves (1997) | 1990–1993 | ROA, ROE, Total return | (+) | Fortune 500 rating + KLD rating |
Wright and Ferris (1997) | 1984–1990 | Jensen ∝ | (−) | Divestment of South African business units |