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Article
Publication date: 13 June 2020

Vanita Tripathi and Amanpreet Kaur

The study aims to contribute towards the sustainable development of financial systems, by testing the performance of socially responsible investing alternatives in…

Abstract

Purpose

The study aims to contribute towards the sustainable development of financial systems, by testing the performance of socially responsible investing alternatives in emerging BRICS countries. The study outcomes give us an insight into viability of responsible financial decisions in contrast with the conventional style of investing.

Design/methodology/approach

The authors examine the performance of socially responsible indices of BRICS nations vis-à-vis respective conventional market indices using various risk-adjusted measures and conditional volatility measures. We further segregate the 12-year study period to crisis and non-crisis period particular to the respective country, as well as a common global financial crisis period to analyze the impact of market conditions in BRICS nations and observe the performance using dummy regression analysis. Conditional volatility of the stochastic index series is measured using ARCH-GARCH analysis. Fama Decomposition Model helps rank the index performance through the sub-periods.

Findings

Fama Decomposition Model helps us observe that while Brazil secures a position in top rankers consistently, it is India that ranks top during crisis period. With evidence of outperformance in terms of risk-return by SRI indices of BRICS countries through the overall period as well as through different market conditions, our study contributes to the positive literature on socially responsible investing.

Research limitations/implications

The study explores performance of SRI in BRICS and finds evidence of the sustainable investment to be non-penalizing to the investor, even as the performance trend remain distinct in the countries with same level of development. It has implications for the investors and asset managers to include responsible stocks, while for the companies and regulatory bodies to unite for better reporting and disclosures. Given the broad implications, future research is required to link the impact of various cultural, legislative and demographic factors on the level and performance of the socially responsible investment in BRICS nations.

Practical implications

The current study evaluating and comparing performances of the socially responsible investments in BRICS nations puts forth following implications for the different sectors of the society, especially in emerging countries: (1) BRICS organization – The association of five economic giants, having significant influence over global as well as regional affairs, can aim to orient the countries' efforts towards collective sustainable development by designing uniform SRI framework. (2) Investors – In the globalization era, the investor can gain from ethical cross border investments to diversification and country benefits. (3) Companies and regulatory bodies – Only voluntary or mandatory unified efforts, to provide accurate and consistent disclosures, can upscale the mediocre growth trends of sustainable investing in emerging economies. (4) Asset Managers – Call of greater role in educating, warding off inhibitions related to RI.

Originality/value

This is to certify that the research paper submitted by us is an outcome of our independent and original work. We have duly acknowledged all the sources from which the ideas and extracts have been taken. The project is free from any plagiarism and has not been submitted elsewhere for publication.

Details

Journal of Advances in Management Research, vol. 17 no. 4
Type: Research Article
ISSN: 0972-7981

Keywords

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Book part
Publication date: 7 July 2014

Stephanie Giamporcaro and Suzette Viviers

The anti-apartheid movement represented a cornerstone for socially responsible investors in the 1970s and 1980s driven by the willingness to promote lasting social change…

Abstract

Purpose

The anti-apartheid movement represented a cornerstone for socially responsible investors in the 1970s and 1980s driven by the willingness to promote lasting social change. What happened next in terms of socially responsible investing (SRI) in the free South Africa? This chapter explores the local development of SRI in South Africa post-apartheid.

Design/methodology/approach

An in-depth literature review combined with a content analysis 73 SRI funds’ investment mandates were undertaken to investigate the local development of SRI in South Africa over the period 1992–2012.

Findings

Mechanisms of local divergence and global convergence have both shaped the phenomenon of SRI in South Africa. SRI in South Africa represents a melting-pot of societal values anchored in a local developmental and transformative political vision, some local and global Islamic religious values, and worldwide SRI and CSR homogenisation trends.

Originality/value

This chapter is the first attempt to outline the mechanisms of local divergence and global convergence that have moulded SRI in a democratic South Africa.

Details

Socially Responsible Investment in the 21st Century: Does it Make a Difference for Society?
Type: Book
ISBN: 978-1-78350-467-1

Keywords

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Article
Publication date: 29 April 2020

Mark Anthony Camilleri

This study aims to explain how socially responsible investing (SRI) has evolved in the past few decades and sheds light on its latest developments. It describes different…

Abstract

Purpose

This study aims to explain how socially responsible investing (SRI) has evolved in the past few decades and sheds light on its latest developments. It describes different forms of SRI in the financial markets, and deliberates on the rationale for the utilization of positive and negative screenings of listed businesses and public organizations.

Design/methodology/approach

A comprehensive literature review suggests that the providers of financial capital are increasingly allocating funds toward positive impact and sustainable investments. Therefore, this descriptive paper provides a factual summary of the proliferation of SRI products in financial markets. Afterwards, it presents the opportunities and challenges facing the stakeholders of SRI.

Findings

This research presents a historic overview on the growth of SRI products in the financial services industry. It clarifies that the market for responsible investing has recently led to an increase in a number of stakeholders, including contractors, non-governmental organizations and research firms who are involved in the scrutinization of the businesses’ environmental, social and governance (ESG) behaviors.

Originality/value

This discursive contribution raises awareness on the screenings of positive impact and sustainable investments. The researcher contends that today’s socially responsible investors are increasingly analyzing the businesses’ non-financial performance, including their ESG credentials. In conclusion, this paper puts forward future research avenues in this promising field of study.

Details

Social Responsibility Journal, vol. 17 no. 3
Type: Research Article
ISSN: 1747-1117

Keywords

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Book part
Publication date: 2 September 2016

Christophe Revelli

The aim of this chapter is to propose a critical analysis of socially responsible investing (SRI) through debate and reconstruction. Our goal is therefore to try to…

Abstract

Purpose

The aim of this chapter is to propose a critical analysis of socially responsible investing (SRI) through debate and reconstruction. Our goal is therefore to try to understand how the definition of ethics in finance has steered SRI towards a financial approach where ethics is guided by finance.

Methodology/approach

This chapter proposes a two-point approach consisting of a meta-debate and development perspectives. Each approach is divided into three debates (ideological and philosophical, scientific and practical), which are interconnected.

Findings

The chapter concludes that the debate on mainstream SRI is necessary but should be re-discussed, as it is preventing in its current form the concept from developing and being grounded in real ethical values, sacrificing the individual ethics that should be driving investing decisions.

Originality/value

The chapter proposes to rethink the paradigm around SRI through a conceptual framework that re-inserts finance within ethics, where non-financial performance and impact investment should be at the centre of the scientific debates, leading to an SRI based on exclusion, the consideration of controversies and social impact measurement.

Details

Finance Reconsidered: New Perspectives for a Responsible and Sustainable Finance
Type: Book
ISBN: 978-1-78560-980-0

Keywords

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Book part
Publication date: 7 July 2014

Tessa Hebb, Céline Louche and Heather Hachigian

The objective of this chapter is twofold. It first introduces the theme of the book. There are many ways of looking at socially responsible investment (SRI). It can be…

Abstract

Purpose

The objective of this chapter is twofold. It first introduces the theme of the book. There are many ways of looking at socially responsible investment (SRI). It can be viewed as a financial product where the financial performance is the outmost important aspect and cannot be compromised. Or it can be regarded as a force for change to promote and stimulate a more sustainable development. In this chapter we provide a literature review on SRI especially on the notion of the impact and how it has been addressed so far in the literature. The second objective of the chapter is to provide an overview of the volume by introducing each chapter.

Methodology

This chapter reviews the literature on SRI as well as the chapters included in this volume.

Findings

If SRI is about making a change toward sustainability, we ought to study its societal and environmental impacts. Although scholar articles on SRI have gained importance in the two last decades, very little is known on its impact. Research has developed from a narrow concern with negative screening and divestment in isolated cases to a rigorous analysis of its financial performance across a range of ethical and ESG issues. While we have identified some studies that are beginning to explore the potential impact of SRI for society, this remains a crucial area to explore.

Originality/value of the chapter

The chapter contributes to the debates on the societal impact of SRI, a debate that needs to be continued even if or just because it raises some fundamental questions that are complex and difficult but also necessary to advance SRI.

Details

Socially Responsible Investment in the 21st Century: Does it Make a Difference for Society?
Type: Book
ISBN: 978-1-78350-467-1

Keywords

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Article
Publication date: 3 August 2015

Vanita Tripathi and Varun Bhandari

The purpose of this paper is to empirically examine the performance of socially responsible stocks portfolio vis-à-vis portfolios of general companies in the Indian stock…

Abstract

Purpose

The purpose of this paper is to empirically examine the performance of socially responsible stocks portfolio vis-à-vis portfolios of general companies in the Indian stock market.

Design/methodology/approach

The study has used absolute rate of return as well as various risk adjusted measures like Sharpe ratio, Treynor ratio, Jensen’s α, Information ratio, Fama’s decomposition measure and dummy regression model to evaluate the performance of various portfolios.

Findings

Socially responsible stocks portfolios are found to have lower relative risk despite having higher systematic risk. Further the authors find that during crisis and post-crisis period, socially responsible stocks portfolio generated significantly higher return as compared to other portfolios in the Indian stock market. Environmental, social and governance (ESG) Index and GREENEX Index provided positive net selectivity returns in all the three sub periods, especially during crisis period. GREENEX and ESG outperformed NIFTY and SENSEX even on net selectivity basis. This indicates that the compromise made with respect to diversification by investing in socially responsible stocks portfolios was well rewarded in terms of higher returns in Indian context.

Practical implications

The findings lend support to the case of socially responsible investing (SRI) in India and are relevant for companies, regulators, policy makers and investors at large. Mutual funds and other investment funds should launch schemes which invest in socially responsible stocks so as to provide the benefits of SRI even to small investors in India.

Originality/value

The study contributes to the related literature by analysing the performance of socially responsible stocks portfolios in Indian stock market which is one of the emerging markets.

Details

Journal of Advances in Management Research, vol. 12 no. 2
Type: Research Article
ISSN: 0972-7981

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Book part
Publication date: 23 April 2012

Jared L. Peifer

Purpose – The purpose of this chapter is to better understand the changing contours of corporate responsibility. This is accomplished by determining what kind of American…

Abstract

Purpose – The purpose of this chapter is to better understand the changing contours of corporate responsibility. This is accomplished by determining what kind of American is interested in socially responsible investing (SRI).

Methodology/Approach – Analyzing nationally representative survey data, I explore what factors are associated with self-proclaimed interest in SRI.

Findings – I find that interest in SRI is generally not patterned along class or religious lines. Instead, the power to “do good” is more evenly distributed across American society.

Research limitations – Future surveys should measure behavioral involvement in SRI and provide better religious affiliation measures.

Social implications – Higher levels of SRI involvement should bolster the SRI industry's ability to pressure corporate America to behave more ethically.

Originality/Value – This is the first analysis of nationally representative data on interest in SRI.

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Article
Publication date: 23 August 2013

Michael S. Bennett and Zamir Iqbal

Islamic finance and socially responsible investing (SRI) have been two of the most rapidly growing areas of finance over the last two decades. During this period, they…

Abstract

Purpose

Islamic finance and socially responsible investing (SRI) have been two of the most rapidly growing areas of finance over the last two decades. During this period, they have each grown at rates that far exceed that of the financial markets as a whole. The purpose of this paper is to find similarities and commonalities of both markets and identifies how both could benefit from each other.

Design/methodology/approach

The paper takes a comparative approach in comparing and contrasting two markets. The paper reviews the progress and driving forces in both markets and makes policy recommendations.

Findings

Islamic finance has grown at a very impressive rate over the last two decades, but the Islamic fixed income market remains under‐developed. SRI has become an increasingly common investment strategy during that same time period, but there is still insufficient supply of SRI fixed income instruments. The convergence of these two facts creates the opportunity for a fixed income product to be developed that could appeal to both SRI and Shariah (Islamic Law) compliant investors, and thereby serve as a bridge between the Islamic and conventional financial markets. The paper believes the product that could play this role is Sukuk for which the proceeds are used to fund economic development.

Research limitations/implications

The paper takes a view from a financial expert's point of view which could be different from the scholars of Islamic legal system.

Practical implications

The paper provides an innovative view to two different markets and suggests that there are commonalities which need to be exploited for the benefit of both markets.

Originality/value

This is probably the first known attempt to related SRI financing to Islamic financing particularly Islamic capital markets.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 6 no. 3
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 4 December 2018

C. Edward Chang, Thomas M. Krueger and H. Doug Witte

The purpose of this paper is to examine the operating characteristics as well as risk and performance measures of all available self-proclaimed socially responsible funds…

Abstract

Purpose

The purpose of this paper is to examine the operating characteristics as well as risk and performance measures of all available self-proclaimed socially responsible funds (hereafter SRFs) in the USA over the ten-year (2007–2016) period. The first research question addressed is: Do SRFs perform as well as the average of all mutual funds in their respective categories? The second research question addressed is: Are SRF expense ratios correlated with fund performance?

Design/methodology/approach

This study analyzes all socially responsible equity mutual funds, as self-reported to Morningstar. This paper empirically compares operating characteristics and performance measures of SRFs relative to category averages in the US mutual fund industry. Operating characteristics include expense ratios and annual turnover rates. Performance measures include conventional return, risk and risk-adjusted return measures.

Findings

Although prior research suggests that socially responsible investing (SRI) indexes and SRI-friendly stocks have favorable returns, this study finds that these self-proclaimed SRFs underperform the average of all mutual funds in matched equity categories. However, this study demonstrates that a simple filter based on expense ratios can identify those SRFs that will enable investors to do quite well while doing good.

Originality/value

The contribution of this paper is twofold. First, the authors report that self-proclaimed SRFs, as a whole, have not generated competitive returns relative to other mutual funds in the same categories over the past ten years. This result contradicts the notion that socially responsible investors do not give up return performance when investing with their conscience. Second, the authors find that those SRFs with expense ratios in the lowest quartile of their respective category have significantly higher risk-adjusted returns and significantly lower turnover than category averages. Thus, by focusing on SRFs with low-expense ratios, socially responsible investors can do quite well while doing good.

Details

Managerial Finance, vol. 45 no. 1
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 9 November 2015

Joan Junkus and Thomas D. Berry

The purpose of this paper is to provide a review of the most recent work in major finance journals on socially responsible investment (SRI). While SRI involves individual…

Abstract

Purpose

The purpose of this paper is to provide a review of the most recent work in major finance journals on socially responsible investment (SRI). While SRI involves individual investors, firms, and investment managers, the authors concentrate primarily on the investment view.

Design/methodology/approach

The authors briefly review the development of socially responsible investing (SRI) and the theoretical issues related to SRI and investment choice. This is followed by a review of the empirical results concerning firm value. The question of whether SR mutual funds and SR indexes differ in performance or other characteristics from their conventional counterparts is discussed next, and lastly the authors present suggestions for future research directions.

Findings

Despite the large and extensive amount of empirical research published on SRI in recent years, the authors find no definitive answer to the question of SR actions for either the firm or the investor. For firms, evidence linking corporate social responsibility (CSR) rankings with higher value is mixed, and depends on the type of CSR behavior studied as well as the measures of firm performance used. The performance of SR mutual funds and indexes generally are not significantly different from conventional funds or indexes, but again these results are also highly dependent on model specification, time period, benchmark, and other characteristics of the study.

Practical implications

The value of SR investing has not been definitely proved. This means, however, that there is room for further on this important topic.

Originality/value

This paper synthesizes and presents the most recent research on SRI from a wide variety of refereed sources.

Details

Managerial Finance, vol. 41 no. 11
Type: Research Article
ISSN: 0307-4358

Keywords

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