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The Performance of Socially Responsible Funds: Does the Screening Process Matter?
Author(s) -
CapelleBlancard Gunther,
Monjon Stéphanie
Publication year - 2014
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1468-036x.2012.00643.x
Subject(s) - optimal distinctiveness theory , business , process (computing) , sample (material) , selection (genetic algorithm) , quality (philosophy) , investment (military) , work (physics) , finance , computer science , psychology , engineering , political science , chemistry , epistemology , chromatography , artificial intelligence , politics , law , psychotherapist , operating system , mechanical engineering , philosophy
In this study, we examine whether the financial performances of socially responsible investment (SRI) mutual funds are related to the features of the screening process. Based on a sample of French SRI funds, we find evidence that a greater screening intensity slightly reduces financial performance (but the relationship runs in the opposite direction when screening gets tougher). Further, we show that only sectoral screens – such as avoiding ‘sin’ stocks – decrease financial performance, while transversal screens – commitment to UN Global Compact Principles, ILO/Rights at Work, etc. – have no impact. Lastly, when the quality of the SRI selection process is proxied by the rating provided by Novethic, its impact is not significant, while a higher strategy distinctiveness amongst SRI funds, which also gives information on the quality of the selection process, is associated with better financial performance .