scholarly journals Sustainability and Finance: Environment, Social, and Governance (ESG)

2021 ◽  
pp. 189-206
Author(s):  
Caroline D. Ditlev-Simonsen
Keyword(s):  
Social Risk ◽  
Ethical Investment ◽  
Investment Strategies ◽  
Socially Responsible ◽  
Business World ◽  
Central Function ◽  
Responsible Investment ◽  
Business Opportunity ◽  
Reduction Activity

AbstractFinance plays a central function in the business world. From being included in small and specialized funds, Environment, Social, and Governance (ESG) and socially responsible investment (SRI) have become part of the mainstream for investors and analysts. In this chapter, I will address what ESG, SRI, environmental and social risk assessment, and ethical investment are about, as well as different investment strategies taking these into account. Further, dilemmas that arise are introduced such as what is a sustainable sector or product and how this differs based on the values of individuals. The move from addressing sustainability issues as a risk reduction activity to a business opportunity is discussed. Finally, the Norwegian Pension Fund, the world’s largest fund, is used as an example to illustrate product-based and conduct-based exclusions in practice.

Sustainability-themed mutual funds: an empirical examination of risk and performance

2018 ◽  
Vol 19 (3) ◽  
pp. 247-261 ◽  
Author(s):  
Federica Ielasi ◽  
Monica Rossolini ◽  
Sara Limberti
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
Investment Strategies ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Fund Managers ◽  
And Performance ◽  
Sustainable And Responsible Investment ◽  
Ethical Funds

PurposeThis 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/approachThe 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.FindingsSustainability-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/implicationsThe 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/valueThe 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.

Exploring the strategic variety of socially responsible investment

2019 ◽  
Vol 10 (3) ◽  
pp. 545-569 ◽  
Author(s):  
Ana Ivanisevic Hernaus
Keyword(s):  
Research Effort ◽  
Socially Responsible Investment ◽  
Social Implications ◽  
Investment Strategies ◽  
Financial Industry ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Financial Investment ◽  
Weak Intensity

Purpose The purpose of this study is to segment and profile socially responsible investment (SRI) funds based on investment strategies they use. Specifically, the paper investigates how different SRI strategies are applied and how they are related to fund-level characteristics, with the goal of recognising their potential dominant combinations in SRI practice. Design/methodology/approach Cluster analysis was complemented with one-way ANOVA to classify 147 SRI funds from 11 European countries into different groups based on the diversification (number and type) and application (intensity of usage) of the investment strategies. Discriminant analysis and chi-square tests were conducted to profile the clusters. Financial performance was examined by running multiple hierarchical regression and dominance analyses to determine meaningfulness of particular investment strategies within each of the SRI fund clusters. Findings Three basic SRI fund clusters were recognised: strong-intensity strategic heterogeneity, weak-intensity strategic heterogeneity and weak-intensity strategic homogeneity. The combination of SRI strategies used in the weak-intensity strategic homogeneity cluster significantly explained the variance in mid-term financial returns. Practical implications Fund managers may use these results to make more informed investment decisions on the selection and the application of SRI strategies. Social implications Financial industry has significant and broad and not only economic but also social implications. This research effort results in better understanding of the SRI universe, potentially leading to a broader consideration of the societal impact of financial investment. Originality/value The author provided useful insights into existing bundles of SRI strategies used in the European SRI market, recognised dominant investment strategies within SRI strategy portfolios and reported how strategic variety is related to fund-level characteristics.

scholarly journals Socially responsible investment strategies for the transition towards sustainable development: the importance of integrating and communicating ESG

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mauro Sciarelli ◽  
Silvia Cosimato ◽  
Giovanni Landi ◽  
Francesca Iandolo
Keyword(s):  
Sustainable Development ◽  
Asset Management ◽  
Small Sample ◽  
Sustainable Growth ◽  
Investment Strategies ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
Sustainable Finance ◽  
Multiple Case

PurposeRecently, socially and responsible investments (SRI) have constantly grown becoming a highly discussed issue. Therefore, the main purpose of this paper is to better understand if environmental social governance (ESG) criteria integration in investment strategies can support the transition of finance toward a more sustainable growth.Design/methodology/approachAn explorative analysis based on a multiple case study has been conducted and addressed by a content analysis on the Key Investors Information Documents (KIIDs) that the sample companies published for 2020.FindingsThe achieved results demonstrated that the case companies differently integrated ESG into their SRI; thus, if some of them are quite near to a full integration, the others demonstrated less than a full commitment with ESG. This seems to be mainly due to the different approach that asset management companies (AMCs) and/or managers have adopted for integrating ESG criteria.Research limitations/implicationsEven though the achieved results offered some interesting insights for asset managers, the explorative and qualitative nature of this study and the small sample investigated somewhat limits it.Practical implicationsAMCs, consultants and managers in developing and implementing their SRI strategy could be much more focused on the importance of ESG integration for the transition toward a more responsible and sustainable finance (micro-level) as well as a more sustainable development (macro-level).Originality/valueThe paper provides new insights into the essence of SRI strategies and their potential to contribute to sustainable development. Thus, it tries to shed new lights on the role that ESG can have to stimulate and support investment decisions and, in so doing, contributing to make finance grow more sustainable.

The risk in socially responsible investing: the other side of the coin

2019 ◽  
Vol 20 (1) ◽  
pp. 14-38 ◽  
Author(s):  
Alberto Burchi
Keyword(s):  
Academic Research ◽  
Continuous Optimization ◽  
Investment Strategies ◽  
Socially Responsible ◽  
Content Type ◽  
Responsible Investment ◽  
The Real ◽  
Responsible Investing ◽  
Average Return ◽  
Risk Indices

Purpose The field of socially responsible investment (SRI) has become a central theme in the mutual funds industry. The risk implications associated with this investment approach are less explored. This study further investigates the real contribution to the investor offered by the SRI alternative.The aim of this paper is to throw more light on this debate. Design/methodology/approach Analyzing a large sample of US companies, this study investigates the tendency to generate risk when the portfolio is built, taking into account SRI. The research is based on the backtest of the real performance obtainable by adopting different investment strategies in which the red line is the selection method based on the principles of corporate social responsibility. Findings The investor must pay a cost that depends on the degree of rigor in the selection criteria. The risk associated with SRI is influenced by the measure adopted. SRI has a better asymmetric risk behavior than other securities. The results suggest using different selection models according to the investor’s objectives. When the objective is to maximize the average return and the remuneration risk, the SRI selection model should be negative or at least as inclusive as possible. In the event that the investor’s objective is to contain risk indices, a restrictive approach to the selection of investments is advisable. Originality/value Academic research has long been investigating the ability to generate profits but often neglects the levels of risk implicit in such investment approaches. The originality of this research consists in the adoption of a model based on the continuous optimization of the portfolio. This approach allows the results to be assessed by the returns actually obtained.

scholarly journals La Finance durable et l’ISR au service d’une économie pérenne et responsable : Quelle dynamique au MAROC ?

2017 ◽  
Vol 13 (31) ◽  
pp. 418
Author(s):  
Meryem Chiadmi
Keyword(s):  
Sustainable Development ◽  
Investment Decision ◽  
Its Region ◽  
Public Institutions ◽  
Investment Strategies ◽  
Socially Responsible ◽  
Dominant Form ◽  
Responsible Investment ◽  
Sustainable Finance ◽  
Corporate Social

This paper focuses on sustainable finance and its most dominant form, socially responsible investment (SRI). Favored by the emergence of sustainable development, SRI consists in integrating into the investment decision process the respect of extra-financial criteria and reflects a developed practice of corporate social responsibility (CSR). The implementation of investment strategies based on sustainable financing approaches has increased in recent years. Our objective is to highlight the situation of this form of sustainable finance in Morocco and to answer the following question: "Morocco which has inscribed its investment strategies and its growth policy in logic of sustainable development that it put in place to attract investors (companies or savers) concerned societal and environmental issues?" The study of the Moroccan context, with emphasis on the commitment of the different actors, allowed us to draw up an inventory of the dynamics of this finance and to conclude that Morocco has a head start in its region and is moving more and more towards green financing but we are still far from the development rates achieved in the world. Its SRI market is still embryonic and represents a niche to exploit. Obstacles still hinder the transition to a sustainable and responsible economy and it is appropriate for all actors (State, private or public institutions, civil society and individuals) to deploy even more efforts to meet the requirements of a changing world.

Understanding Socially Responsible Investing and Its Implications for Islamic Investment Industry

2019 ◽  
Vol 7 (1) ◽  
pp. 1
Author(s):  
Mohd Nizam Barom
Keyword(s):  
Investment Decision ◽  
Socially Responsible Investing ◽  
Clear Understanding ◽  
Socially Responsible ◽  
Responsible Investment ◽  
Developed Economies ◽  
Responsible Investing ◽  
Screening Strategies ◽  
Investment Process ◽  
Islamic Investment

Understanding Socially Responsible Investing and Its Implications for Islamic Investment Industry // // // // // Social, ethical and environmental concerns have been used as important consideration for investment decision by an increasing number of investors. This can be seen by the size and growth of the socially responsible investment (SRI) industry in the developed economies. At the same time, scholars and commentators of Islamic finance have also called for Islamic investment industry to learn from the experience of SRI in incorporating social responsibility issues in the investment process, in line with the ethical principles of Islam and the overall objective of the Shari’ah (Maqasid al-Shari’ah). This would require Islamic investment sector to have a clear understanding of the SRI industry in order to effectively benefit from its experience. This is particularly critical due to the significant diversity of investors and complexity in the issues and strategies adopted in the SRI industry. Hence, this paper adds to the Islamic investment literature by providing an extensive  and systematic survey of SRI industry in terms of its (i) underlying motivations and values; (ii) issues of concerns; (iii) types of investors; and (iv) screening strategies. It then synthesizes these components within the context of the ‘value-based’ investors. This synthesized framework offers a useful tool for Islamic investment practitioners to understand the theoretical and practical aspects of SRI. Subsequently, the paper highlights important implications of the findings for Islamic investment industry in terms of the issues that it needs to consider in emulating SRI practices and a number of lessons that it can learn from the SRI experience.  

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