SOCIALLY RESPONSIBLE INVESTING DURING DOWNTURNS - Evidence from the U.S. and European markets 2000-2011

Abstract

Socially responsible investing has become more mainstream during the last decade and this trend can be predicted to continue. The growth of Socially Responsible Investing (SRI) has been extremely rapid during recent years. This might tell us about investors’ grown interest in the environmental, governance and social effects of their investments. The goal is to be socially aware and enjoy competitive return at the same time.

In this paper we focus on SRI stock indices and their benchmarks in both the US and in Europe. The SRI index representing US is MSCI KLD and the benchmark for it is S&P500. For the European data the STOXX Sus represents SRI index while STOXX 600 represents conventional index. The observation period is 2000-2011. The main focus is to find out how the SRI indices perform compared to the conventional indices and also whether there are differences in performance during a downturn.

The findings are consistent with the findings in earlier studies. There are no clear signs of price that investor has to pay to be socially responsible while considering where to invest. However the lack of general agreements on the role of socially responsible investing makes it difficult to define and measure. Individuals’ own beliefs about what is socially responsible might effect on the evaluation of the performance of SRI as well.