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Very few studies verified whether Socially Responsible Investments (SRIs) add value during a financial turmoil. We fill this gap. We conduct the analysis by employing the Fama and French (2015) five-factor model along with the usual Fama and French's (1993) and Carhart's (1997) models. We also propose an innovative methodology that takes into consideration the higher moments of the explanatory variables in order to deal with the non-normality and the heteroskedasticity of return distributions. Rather than inspecting Socially Responsible (SR) mutual funds as done by most of the existent literature, we concentrate on SR indexes, in the conviction to overcome some of the limitations that can potentially bias an analysis carried out on mutual funds. Our results show that both SR and conventional indexes performed almost in the same way independently of the financial market conditions. Little evidence can at best support the conclusion that SRIs dampened the downside risk during the recent financial crisis in North America only. At the same time, SRIs do not seem to suffer from a risk-adjusted perspective during normal times. As expected, SRIs bear a higher level of idiosyncratic volatility compared to their respective conventional investments. Our innovative methodology plays an important role in explaining the cross section of SR returns.
A detailed look at the role of social responsibility in finance and investing The concept of socially responsible finance and investing continues to grow, especially in the wake of one of the most devastating financial crises in history. This includes responsibility from the corporate side (corporate social responsibility) as well as the investor side (socially responsible investing) of the capital markets. Filled with in-depth insights and practical advice, Socially Responsible Finance and Investing offers an important basis of knowledge regarding both the theory and practice of this ever-evolving area of finance. As part of the Robert W. Kolb Series in Finance, this book showcases contributed chapters from professionals and academics with extensive expertise on this particular subject. It provides a comprehensive view of socially responsible foundations and their applications to finance and investing as determined by the current state of research. Discusses many important issues associated with socially responsible finance and investing, like moral hazard and the concept of "too big to fail" Contains contributed chapters from numerous thought-leaders in the field of finance Presents comprehensive coverage starting with the basics and bringing you through to cutting-edge, current theory and practice Now more than ever, we need to be mindful of the social responsibilities of all investment practices. The recent financial crisis and recession has changed the financial landscape for years to come and Socially Responsible Finance and Investing is a timely guide to help us navigate this difficult terrain.
This Palgrave Pivot aims to build a bridge between corporate social responsibility (CSR) and sustainable finance in financial markets. It investigates classic CSR topics in the light of a modern conception of sustainability. The first part emphasizes four relevant topics in the CSR panorama of financial institutions: banks remuneration practices; human capital disclosure; the impact of environmental performance on banks, and finally, the institutional investors’ attitude towards socially responsible investments (SRIs). The second part explores CSR practices within the financial markets and discusses risk-return profiles of SRI and non-SRI indexes in different time frames. It investigates whether thematic social responsible funds obtain different risk-return than traditional funds, and finally, assesses whether equity crowdfunding could foster social innovation. This book is aimed at scholars and students who are interested in social impact investing and practitioners involved in the social impact market.
For the effective and better implementation of CSR law, development of SRI market in the investment world is essential. Unless the investors turn socially responsible, CSR principles cannot be enforced in practice. This paper examines whether the companies that are socially responsible are performing better than general companies in terms of risk, return and various risk-adjusted measures during pre-crisis, crisis and post-crisis periods. We find that despite having higher risk, socially responsible stocks portfolios generated significantly higher returns and hence outperformed other portfolios on the basis of all risk-adjusted measures as well as net selectivity returns during crisis period. The results uphold even with the use of Fama-French three factor model for estimating excess returns. Besides augmenting existing literature, our results clearly corroborate the fact that investors can derive benefits by investing in socially responsible companies (especially in crisis period). The study supports the view that socially responsible products can be used as a safe investment vehicle by investors during adversity. Therefore, regulators, policy makers and mutual funds should construct and make available various socially responsible investment products to initiate the movement of socially responsible investing in India.
The authors have done an excellent job explaining the development and practice of Socially Responsible Investment (SRI). Under the recent recognition of Corporate Social Responsibility (CSR) in Asia and its strong emphasis by US and European corporations, this book provides important guidance to students and professionals who are interested in the effects and implications of SRI. This book is truly informative and should be on the reading list of all fund managers and CFOs of international corporations which are serious about CSR. Louis T.W. Cheng, Hong Kong Polytechnic University Individual investors and corporate heads have the responsibility to keep abreast of major changes in the marketplace. Socially responsible investment is one of those changes. Fung, Law and Yau provide, in a single source, a great opportunity to get up to date on an area that will be a force for years to come. I encourage any thoughtful investor or manager to read this book. Thomas Schneeweis, University of Massachusetts Amherst, US Socially responsible investment (SRI) is becoming increasingly popular and can be potentially rewarding to all parties concerned. This book discusses the opportunities, challenges, and practices of SRI in a global financial environment in a consistent and integrated framework of risk management. It also covers a wide variety of environmental, social, and corporate governance (ESG) issues related to various participants, such as values-based retail, institutional investors, corporations, banks, supranational agencies, and non-governmental organizations. Readers are provided with the perspectives of SRI from various players in the financial community from values-based investors to fiduciaries to supranational agencies. The authors analyse the incorporation of ESG issues into investment practices within a regulatory, legal, reputational, and operational risk management framework. Academics, corporate executives, government regulators and policymakers, bankers, and non-governmental organizations involved with sustainable development will find much of interest in this book.
Sustainable Investing is fast becoming an essential method of generating long-term returns, moving beyond the negative approaches to socially responsible investing that have dominated the field. This book, our second on the subject, provides over 15 case studies of leading global investors and companies demonstrating how they successfully apply sustainability aspects to their core strategies. Learn from prominent thought leaders Dan Esty and Paul Hawken among others who have contributed key chapters. Our chapter on performance shows clearly how these strategies have been working once negative approaches are parsed out by those examining fund returns. This book also examines in great depth what data exists, and what's on the horizon, to best measure & capture sustainability successfully. Regional perspectives, including 3 chapters on Asia, and focuses on Canada, Australia, Africa & India are also included, as is a look across asset classes. Sustainable Investing, when performed with a positive perspective, has been outperforming the mainstream, unlike negative approaches designed to match benchmark returns. From eco-efficiency to sustainability-driven innovation and beyond, investors of all shapes & sizes need to know how best to position themselves for the radical market shifts underway.
Participants in Asian financial markets have witnessed the unprecedented growth and sophistication of their investments since the 1997 crisis. Handbook of Asian Finance: REITs, Trading, and Fund Performance analyzes the forces behind these growth rates. Insights into banking, fund performance, and the effects of trading technologies for practitioners to tax evasion, market manipulation, and corporate governance issues are all here, presented by expert scholars. Offering broader and deeper coverage than other handbooks, the Handbook of Asian Finance: REITs, Trading, and Fund Performance explains what is going on in Asia today. Presents the only micro- and market-related analysis of pan-Asian finance available today Explores the implications implicit in the expansion of sovereign funds and the growth of the hedge fund and real estate fund management industries Investigates the innovations in technology that have ushered in faster capital flow and larger trading volumes
Over the last decade, socially responsible investments (SRIs) have become paramount to both professionals and academics. In the aftermath of the financial crisis of 2007-8, practitioners have become much more involved in new financial models that integrate returns and positive social and environmental impacts. The authors argue that previous irresponsible financial models are anachronistic, and propose a new relationship between stakeholder and shareholder. Starting from the mainstreaming of SRI, this book recovers the social function of banks and the innovative role of crowdfunding and venture capital models. The book offers a unified perspective for firm and funder, making it a timely and invaluable read for scholars and practitioners interested in sustainable development and social impact finance.
This volume describes the thinking on sustainable development and a variety of initiatives across Europe, illustrating regional efforts to foster sustainable communities and ecological and social innovation. It contains various contributions which showcase examples of thinking, economic and social structures and in consumption and production patterns needed, to implement the SDGs. This book is part of the "100 papers to accelerate the implementation of the UN Sustainable Development Goals initiative".
Seminar paper from the year 2011 in the subject Business economics - Investment and Finance, grade: 2, University of Innsbruck (Department of Banking and Finance ), course: Sales Management , language: English, abstract: In the light of the financial crisis SRI (Socially responsible investment) became popular as never before. SRI has already been around for quite some time before the crisis, but this industry has never seen such a volume increase as in the last 4 years. The EU market for SRI almost doubled since 2007 (Cropper, 2010). This clearly shows that the events forcing the financial crisis motivated investors to rethink their criteria for making their investment decisions. Naturally, such a high growth rate of an industry comes from an increasing demand. In order to satisfy the increasing demand for SRI products the SRI industry is going threw a ‘transformative’ and ‘innovative’ phase exploring new areas for SRI, creating new products and services. However, SRI investment has a very broad definition band and cannot be boxed in easily. Hence, as good as it might be, SRI investment brings also many challenges with it, because it is such a broad concept. Therefore, the purpose of this paper is to give an overview about what SRI is and to find answers to the question of “How sustainable SRI is?” In the first chapter the paper will discuss the different definitions and motivations for SRI investments. The second chapter will take a closer look on the history of the SRI market and the different categories and approaches to create an SRI portfolio. Further it will present the available product categories of the SRI market. The third chapter will analyse the development of the SRI market in Europe and the US. In the fourth chapter the performance of socially responsible investment will be analyzed. Finally the fifth chapter will discuss the main constraints of SRI.