Does socially responsible investing (SRI) hurt (or help) returns on a risk adjusted basis? Of course theoretically it seemingly should lower pecuniary returns, but empirically it seems that every researcher has a different answer. Now Derwall, Guenster, Bauer, and Koedijk present their views on the argument. The authors form portfolios based on Innovest eco-efficiency scores. The finding? “After controlling for risk and investment style we find that our high-ranked portfolio outperforms the low-ranked counterpart. This performance gap widens considerably and becomes statistically significant once industry-effects are accounted for as well.” Which goes against theory and keeps the debate alive for another day. [FinanceProfessor.com Annotation]
Authors: Jeroen M.M Derwall, Kees C.G. Koedijk, Nadja Guenster, Rob Bauer
Source: Social Science Research Network (SSRN)
Subjects: Finance, Social Responsibility (ESG)
Industry: Investing
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