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Article
Publication date: 1 July 2004

Niklas Kreander, Ken McPhail and David Molyneaux

While the literature contains a number of studies of ethical investment funds, relatively little is known about church investment processes and practices despite the…

Abstract

While the literature contains a number of studies of ethical investment funds, relatively little is known about church investment processes and practices despite the significant role they have played in the development of the sector. This paper attempts to address this lacuna by studying the ethical investment programmes of two UK churches: the Methodist Church and the Church of England. The paper initially explores the relationship between the Judaeo‐Christian church and the development of the ethical investment movement. This history reveals an engagement both at the institutional and individual level that challenges the assumed sacred secular divide now commonplace within the literature and the more recent guardian‐advocate dichotomy. Second, the paper delineates the way in which the churches theologically conceptualise this engagement and describes how these values are proceduralised through the operation of the funds. The final section provides an immanent critique of church investments both at a performative and theological level. The aim of this concluding section is to engage with the churches in exploring the broader potential for the church in effecting social change.

Details

Accounting, Auditing & Accountability Journal, vol. 17 no. 3
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 2 November 2015

Anett Wins and Bernhard Zwergel

This paper aims to provide an overview of the literature to point out similarities and differences among private ethical investors across countries and time. Over the past…

Abstract

Purpose

This paper aims to provide an overview of the literature to point out similarities and differences among private ethical investors across countries and time. Over the past three decades, many surveys have been conducted to advance the understanding of the demographic characteristics, motivation and morals of private ethical investors across countries and time. To date, the survey-based evidence on private investors into ethical funds is geographically rather segmented, and the research questions are fairly diverse. This permits only very temporally or regionally selective conclusions. Thereby, the authors identify interesting topics for future research.

Design/methodology/approach

To identify the relevant literature for our review, the authors carried out a structured Boolean keyword search using major library services and databases.

Findings

When questions about negative screening criteria are presented in a direct investment context, the consensus of private ethical investors “worldwide” (on average) is that social screening issues are most important, followed by ecological and moral topics. The percentage of ethical funds in the fund portfolio of the average private ethical investor in Europe seems to increase when the investor exhibits high degrees of pro-social attitudes and perceived consumer effectiveness. European private ethical investors are of the opinion that ethical funds perform worse but are less risky than conventional funds.

Practical implications

The authors make suggestions on how investment companies should design their funds so that they can attract more socially responsible investors.

Originality/value

The paper is of particular value because it focuses on private investors in the fast growing retail market of socially responsible investment funds.

Details

Qualitative Research in Financial Markets, vol. 7 no. 4
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 6 August 2018

Federica Ielasi, Monica Rossolini and Sara Limberti

This paper aims to analyze the portfolio characteristics and the performance measures of sustainability-themed mutual funds, compared to ethical mutual funds that…

Abstract

Purpose

This paper aims to analyze the portfolio characteristics and the performance measures of sustainability-themed mutual funds, compared to ethical mutual funds that implement different sustainable and responsible investment strategies.

Design/methodology/approach

The study refers to a European sample of 106 ethical funds and 51 sustainability-themed funds. The monthly performance of each fund is downloaded from Bloomberg for the period from January 1996 to December 2015. By applying a Fama and French (1993) three-factor model, the authors overcome the limits of a capital asset pricing model (CAPM) based-single index model, to compare the performance of the two categories of funds.

Findings

Sustainability-themed funds do not differ significantly from ethical funds in terms of portfolio attributes, except for market capitalization, age and net asset value. Regarding performance measures, the results shows that sustainability-themed funds have a lower underperformance than ethical funds (as measured by Jensen’s alpha), whereas the samples do not differ in terms of market risk (as measured by Beta coefficient). The idiosyncratic risk of sustainability-themed funds is positively influenced by the specific portfolio strategies. The sustainability-themed funds show a higher concentration in the industrial sector and a lower exposure to financial sector than ethical funds; in terms of geographical strategy, they are more global and international oriented; they mainly focus on small caps and value stocks.

Research limitations/implications

The different sustainable and responsible investment strategies can be applied simultaneously and in a growing number of possible combinations. Mutual fund managers can consider thematic approach as an efficient opportunity for reconciling financial performance and economic sustainability. It is demonstrated that sustainability-themed funds adopt a portfolio strategy significantly different from ethical funds and from the environmental, social and governance benchmarks. Mutual fund managers implement a thematic specialization without any negative impact on the funds returns compared to ethical funds; actually, with a proper diversified portfolio, they are able to reduce idiosyncratic risk.

Originality/value

The analysis is extremely innovative, especially for the thematic sample. During the past 15 years, literature about sustainable and responsible investment has been focused especially on the differences in terms of risk and performance between socially responsible and conventional funds. This paper, starting from the methodology applied in these studies, wants to compare two different types of socially responsible strategies, with a specific focus on sustainability-themed mutual funds, given their exponential growth in the past few years.

Details

The Journal of Risk Finance, vol. 19 no. 3
Type: Research Article
ISSN: 1526-5943

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Book part
Publication date: 28 January 2015

Carmen-Pilar Martí-Ballester

Pension funds are demanding increasingly more information about the levels of corporate social responsibility achieved by companies through the use of corporate social…

Abstract

Purpose

Pension funds are demanding increasingly more information about the levels of corporate social responsibility achieved by companies through the use of corporate social responsibility reports to select which firms’ stocks to invest in. This could improve or reduce the financial performance achieved by pension plans. Therefore, this chapter examines the financial performance obtained by equity pension plans, distinguishing between solidarity pension plans, ethical pension plans and conventional pension plans.

Design/methodology/approach

We use a sample of 153 individual system pension plans (129 conventional pension plans, 6 solidarity pension plans and 18 ethical pension plans). Using these sample data, we implement the robust random effects panel data methodology.

Findings

The results show that ethical pension plans perform similarly to traditional pension plans, while solidarity pension plans significantly outperform conventional pension plans.

Research limitations/implications

We do not know what weights managers give to environmental, social and corporate governance criteria, which may influence the financial performance of pension plans.

Practical implications

The results of this study could be relevant for pension plan managers that may be considering the integration of ethical screening in their management strategies in order to offer differentiated products and for investors who would like to invest in ethical pension plans without compromising their financial performance.

Originality/value of the chapter

Previous studies have analysed the financial performance obtained by traditional and ethical funds, but in this chapter we compare the financial performance of traditional, solidarity and ethical pension plans.

Details

The UN Global Compact: Fair Competition and Environmental and Labour Justice in International Markets
Type: Book
ISBN: 978-1-78441-295-1

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Article
Publication date: 1 April 2004

Christopher J. Cowton

Ethical investment funds are retail financial products which explicitly add social or ethical goals or constraints to normal financial criteria in selecting their…

Abstract

Ethical investment funds are retail financial products which explicitly add social or ethical goals or constraints to normal financial criteria in selecting their underlying share portfolio. By means of a case study of a UK fund, this paper explores how the relationship between ethical criteria and financial performance might be handled, which is one of the critical issues that arise in putting ethical investment into practice. The research confirms perceptions of a tension between the implementation of an ethical policy and the achievement of good financial performance, and it identifies some of the ways which fund managers might seek to cope with that tension. However, by studying the financial management of an ethical fund in practice, the paper also reveals the ways in which there might be a positive correlation between the financial performance and the ethical effectiveness of a fund, thus providing a complementary perspective to the earlier empirical studies and discussions which have focused on the possibility of ethical concerns undermining financial success.

Details

Accounting, Auditing & Accountability Journal, vol. 17 no. 2
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 1 November 1997

Rodney Wilson

Reports that there are lessons which can be learned from the Western ethical “green” finance industry for Islamic investors. States that these are that the criteria for…

Abstract

Reports that there are lessons which can be learned from the Western ethical “green” finance industry for Islamic investors. States that these are that the criteria for investment selection are different, and the modes of permissible financing may also differ, but there are screening and reporting techniques which are of potential importance to both groups of investors. First addresses ethical fund management issues, which should shed some light on the dilemmas facing Islamic investors. Goes on to consider criteria for haram and halal investment, as well as the implications of company capital gearing or leverage for riba. Covers investment specific issues, including the treatment of capital gains in Islam and the evaluation of the conduct of market participants. Finally, surveys emerging markets in the Islamic world, as these are of obvious interest to Muslim investors wishing to broaden their portfolios.

Details

International Journal of Social Economics, vol. 24 no. 11
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 10 May 2011

Robert Watson

The purpose of this paper is to evaluate the marketing of ethical and socially responsible investment (ESRI) funds to retail investors and to analysis the plausibility of…

Abstract

Purpose

The purpose of this paper is to evaluate the marketing of ethical and socially responsible investment (ESRI) funds to retail investors and to analysis the plausibility of the claims made in regard to their performance, achievements and prospects.

Design/methodology/approach

The paper presents an analysis of the claims and marketing strategy adopted in the ESRI industry's Action Guide for Financial Advisors document, produced for their National Ethical Investing Week, 2010.

Findings

The analysis indicates that the ESRI fund industry's Action Guide uses a number of unethical marketing techniques to induce retail investors into investing in ESRI funds and that many of the claims made on behalf of ESRI investing are implausible. Given the past history of mis‐selling in the investment fund sector, these findings ought to be of some concern to regulators and retail investors.

Originality/value

This is the first article that has linked the promotion and marketing of ESRI funds to possible mis‐selling practices.

Details

Journal of Financial Regulation and Compliance, vol. 19 no. 2
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 1 April 1997

Bodo B. Schlegelmilch

Ethical investment funds are among the fastest growing investment vehicles in the UK. Explores some of the environmental changes leading to the popularity of these funds

Abstract

Ethical investment funds are among the fastest growing investment vehicles in the UK. Explores some of the environmental changes leading to the popularity of these funds and briefly reviews some of the screening criteria used to establish ethical portfolios. Based on a sample of 172 investment professionals, analyses the relative importance of ethical and environmental screening compared to the traditional yardsticks of liquidity, return and risk. Discusses implications for the marketing of ethical investment funds and identifies future research directions.

Details

International Journal of Bank Marketing, vol. 15 no. 2
Type: Research Article
ISSN: 0265-2323

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Article
Publication date: 10 July 2017

Jean-François Bonnefon, Marco Heimann and Katia Lobre-Lebraty

The purpose of this paper is to show how overall performance can help foster trust in financial institutions. While a climate of mistrust amongst investors and the general…

Abstract

Purpose

The purpose of this paper is to show how overall performance can help foster trust in financial institutions. While a climate of mistrust amongst investors and the general public toward financial institutions has developed since the recent turmoil in the financial markets, it is believed that mutual funds adopting the overall performance approach can help recover a climate of trust owing to the implied balance between economic, social and environmental performance. More specifically, overall performance promotes values that are similar to investors’ values and could be used by responsible investment funds if they want to contribute to the restoration of trust in investment funds.

Design/methodology/approach

This paper uses an innovative, experimental design to test the effect of value similarity on the trust that investors have in the investment fund. This effect cannot be studied in isolation, which is why it is compared with the effects of financial performance and ethical labeling on trust.

Findings

The authors find that funds with similar values are perceived as more trustworthy by investors. Consequently, overall performance should be added to fund managers' toolbox if they want to foster trust in their fund. The effect of financial performance on trust applies only when the investor has no other information regarding the fund. As for the ethical labeling of funds, it has no effect on trust.

Research limitations/implications

The findings encourage research that aims to develop a comprehensive approach of integrated overall performance focusing on financial and extra-financial values. Bonnet et al.’s (2016) fieldwork on socio-economic management and Naro and Travaillé©’s (2016) work on management controllers provide promising examples in this regard.

Practical implications

Investment funds can acquire an edge by communicating on overall performance and specific values of their target investors. Merely labeling funds as ethical is not sufficient to increase trust.

Social implications

Increasing similarity in values to investors and adopting the overall performance approach in investment funds will increase investors' trust. Trust contributes to social capital and allows societies to create flexible large-scale businesses needed to be competitive in a global environment.

Originality/value

Using an innovative experimental methodology, this paper shows that the underlying factor of overall performance on trust in investment funds is value similarity. It provides researchers and practitioners with insight about the underlying mechanisms of the effect of overall performance on trust.

Details

Society and Business Review, vol. 12 no. 2
Type: Research Article
ISSN: 1746-5680

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Article
Publication date: 5 March 2018

En Te Chen and Yunieta Anny Nainggolan

Despite the benefits of international diversification, the home equity bias phenomenon is well documented in the portfolio choice literature. The purpose of this paper is…

Abstract

Purpose

Despite the benefits of international diversification, the home equity bias phenomenon is well documented in the portfolio choice literature. The purpose of this paper is to investigate whether the same investment behavior applies to domestic socially responsible investments (SRIs) where ethical screenings should be the selection criteria.

Design/methodology/approach

The authors apply the model by Coval and Moskowitz (1999), Grinblatt and Keloharju (2001) and Agarwal and Hauswald (2010) to uncover the effect of distance relative to screenings on SRI domestic portfolio choice. For the first time, the authors test the robustness of distance effect by using time bias, which is the travel time between the fund manager and the company’s headquarter.

Findings

The authors find that SRIs exhibit a strong preference for locally headquartered firms. After controlling for screening activity and other fund characteristics, the authors still find a strong distance bias in SRI fund portfolio decision-making. The authors find that this bias is mostly observed in SRI fund with social screening and that fund holding characteristics determine the propensity of fund managers to invest locally. The results suggest that the local bias puzzle exists in SRI.

Research limitations/implications

This study provides avenue for future research to examine whether the same local bias is found in SRI investment in other countries where they have different characteristics and behavior. Also, the evidence that local bias exists in SRI investment may need further analysis as to whether this is conflicting with the objectives of SRI, which focus more on ethical beliefs.

Practical implications

The results suggest that many local firms in the same city currently held by an SRI fund will not be held by this fund if it is in another city. The implications of the findings are that geographic proximity, along with ethical screenings, is an important dimension to how SRI fund invests.

Originality/value

This study is the first that examines local bias in SRI funds by using portfolio holding data.

Details

Social Responsibility Journal, vol. 14 no. 1
Type: Research Article
ISSN: 1747-1117

Keywords

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