Master’s Thesis Exposé

Socially Responsible Investments

Performance Assessment of Indices and Equity Mutual Funds

Sergejs Macko
Seestrasse 163, 8810 Horgen
+41 76 213 77 89
sergejs.macko@uni.li
FS01101149

Master’s Thesis Exposé

to obtain a Master of Science (MSc) in Banking and Financial Management
Graduate School
University of Liechtenstein

Date of submission: 27.08.2015

 SRI
performance of indices and funds

1. Introduction
Socially Responsible Investments (SRI) or sustainable and ethical investments describe an investment strategy
that pursues to yield financial returns with consideration of social and environmental benefits. The Forum for
Sustainable and Responsible Investment (US SIF) define SRI “as an investment discipline that considers
environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial
returns and positive societal impact”.1 However, the organisation´s reports state that SRI is a broad and evolving
trend, what makes it challenging to fit SRI into a simple and all-embracing term. There are many more definitions
of sustainable investments available in the literature.2 In addition, depending on the investor emphases, the SRI
could appear under various names as “community investing”, “ethical investing”, “green investing”, “impact
investing”, “mission-related investing”, “responsible investing”, “socially responsible investing”, “sustainable
investing” and “values-based investing”, among others.3
Although the heterogeneity of international definition and classification of the Responsible Investing industry
continue to elude, the lines are gradually moving towards standardisation.4 In 2014, the Association of the
Luxembourg Fund Industry’s (ALFI) Responsible Investing (RI) Technical Committee established the following
categories and sub-categories for the responsible investment fund market, illustrated in Appendix 1. The
Committee intentionally divided the fund categories between cross-sectoral and thematic funds, using the widely
used concept of ESG as classification. With the help of this classification, the Committee attempted to cover all
sectors in the responsible investing universe, drawing together categories that have usually been handled
separately. The European SRI Study 2014 by EUROSIF suggests another way of SRI categorisation.5 This
classification has a screening strategy and approaches focus, while ALFI looks at sustainable investing in a rather
thematic manner. The SRI classification of EUROSIF is summarised in Table 1 with the links to the ALFI
categorisation in the third column. Even though the approaches are different, they are complementary to each
other.
It is important to mention that these seven RI screening techniques outlined by EUROSIF are not mutually
exclusive. A fund can use one or numerous strategies to select its investments.
According to the Global Sustainable Investment Review 2014 report, the estimated size of the sustainable
investment market worldwide is 21.4 trillion USD in early 2014. Europe is an absolute leader and a driving force
in Sustainable Investments market; it is representing more than half of the total assets. The United States (US),
Canada and Europe have experienced the largest growth in SRI market over the past decade. 6

1
The Forum for Sustainable and Responsible Investment, 2015.
2
Such as Cowton, 1994, p. 213-214; Button, 1988, p. 10-15; Budde, 2008, p. 5-7.
3
The Forum for Sustainable and Responsible Investment, 2015.
4
Wilkinson, 2015, p. 6.
5
Eurosif A.I.S.B.L, 2014, p. 8-10.
6
Global Sustainable Investment Alliance, 2014, p. 7-8.

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Table 1. The classification of screening techniques of Social Responsible Investments.7

Strategy Description Link with ALFI´s

classification
Sustainability Investment in themed products and assets associated with the ESG social &
themed enhancement and promotion of sustainability. For example, Environment categories
thematic funds with one specific or several concerns related to
ESG.
Best in Class Approach where leading or best-performing investments within a RI positive screening sub-
selection category, universe, or class are selected or weighted based on ESG category
criteria.
Norms-based Investments screening according to their fulfilment of international RI negative screening
screening norms and standards. sub-category & Ethics
(cross-sectoral)
Exclusions This method reduces investible universe by exclusion of particular RI negative screening
investments, investment classes, sectors or countries. sub-category & Ethics
(cross-sectoral)

ESG The consideration of ESG factors and risks into conventional ESG cross-sectoral
integration financial analysis and decisions making based on the ESG relevant category
research.

Engagement Active ownership and engagement activities by shareholder voting ESG governance category
and voting and collaboration with business partners on ESG problems.
Typically, it is a long-term process, aiming to improve
transparency, reporting or influence behaviour.
Impact The investment decisions are targeting to make environmental and Social impact sub-
investing social impact besides generating financial returns. Impact category & Microfinance
investments from developed markets in emerging aim to generate funds sub-category
returns from below market-to-market rate, depending on the
situations.

As illustrated in Figure 2, the European region´s contribution to the total SRI market size is more than 13.5 trillion
USD, followed by the US and Canada with a sustainable investment market size of 6.7 trillion USD and 0.95
trillion USD. Asian and Pacific regions have 53 and 180 billion USD invested in the SRI market.
At the end of 2014, the Responsible Investment fund universe in Europe included 1´874 funds with total assets
under management (AuM) of 372 billion EUR. This is a 56% increase in AuM and 6% growth in number of funds
since 2012. The breakdown of these 1´874 European funds by domicile and assets under management are depicted
in Figure 3. Luxembourg is the largest fund-management hub in Europe for SRI funds. It represents 30 % of the
total number of funds and 35% of the global AuM. Around 14% of the funds are domiciled in France with about
16% of the total AuM. Both Belgium and the United Kingdom (UK) have 6% of the total amount of funds with
approximately the same percentage of AuM in UK. About 5% of the total number of funds managed in Sweden
represent 7% of the total AuM. A small and unspecified amount of funds is domiciled in Norway, however, these
are rather large funds. Norwegian SRI Funds equal 10% of the total European AuM.8

7
Eurosif A.I.S.B.L, 2014, p. 8; KPMG, 2015, p. 7-8.
8
Wilkinson, 2015, p. 15.

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Figure 1. The market size of Social Responsible Investments by region.9

In conclusion, the Sustainable and Responsible Investment industry is a young and rapidly evolving market. The
leading position in this market is taking the European region, with an amount of 13´608 billion USD invested with
Social Responsible considerations. Followed by the United States and Canada with a market size of 6´572 and
945 billion assets in USD. Worldwide, SRI markets sum up to 21.36 trillion USD of assets. The classification of
approaches and terminology of SRI are becoming more defined and standardized than before, bringing a clearer
and more specific segmentation of investments on this market. The surge of the last decade and the current scale
of the SRI market prove, that social, environmental and ethical concerns are an important part of decision making
in a modern asset management industry.

9
Global Sustainable Investment Alliance, 2014, p. 7-8.

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Figure 2. Breakdown of number of funds (upper) and AuM (lower) in Europe by domicile in percentage.
Self-depicted by author.

Number of funds

Luxembourg
30%
39% France
Belgium
.
United Kingdom
Sweden
14%
5% Rest
6% 6%

Assets under management

10%
Luxembourg
35% France
26% United Kingdom
Sweden
Rest
7% Norway
6% 16%

2. Current state of research

As described in the previous chapter, the SRI market has surged within the last decade and is expected to evolve
further. As a field of scientific research, Social Responsible and Sustainable investing is not new. The first
academic research for the US market was conducted in the mid-70s10 and the European market was investigated
in the 90s11 of the previous century. Numerous studies have been conducted on various markets around the world.
There are two controversial opinions regarding the performance of SRI. A number of researchers argue that Social
Responsible Investing restricts the investable universe and lowers the diversification benefits. This “may shift the
mean-variance frontier towards less favourable risk-return trade-offs than those of conventional portfolios”.12
Therefore, SRI are unlikely to over-perform the conventional portfolios with an unrestricted investable universe.
Moreover, sustainable investments are associated with material costs of performing additional screenings, which

10
Bowman & Haire, 1975, p. 49-58.
11
Travers, 1997, p. 50-56.
12
Renneboog, Horst, & Zhang, 2008, p. 302-304.

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are partially passed onto investors and partly reduce the return.13 These arguments define the underperformance
hypothesis. In contrast, other research suggests that SRI screening can reveal important information about the
company and add financial value. This information is not publicly available, as it needs additional research, thus
not implemented into the prices of securities.14 Therefore, the utilisation of this information in investment
processes might reward the Asset Manager with a positive return, even after consideration of the costs of
additional research. The important assumption is that the sustainability, the ethical and the social rating of a
company have a causal relation to its financial performance. The ESG rating may positively affect the reputation
of the company, attract new clients and business partners, as well as improve the relationship with the government
and local communities.15 Another hypothesis suggests that there is no significant difference between the return of
SRI funds and conventional funds / benchmarks. This hypothesis assumes that the SRI screening has no positive
or negative effect on the financial performance.16
Table 2 summarises the current state of research in the field of SRI fund performance against the conventional
fund market. Von Wallis and Klein (2014, p. 3-5) performed an extensive literature review regarding the SRI
vehicle performance between 1986 and 2012. They conclude that about 75% of empirical studies regarding the
RI performance have a sample size with up to 100 vehicles. Only 11% of studies have sample sizes of more than
300 observations. Moreover, they summarise the results of previous studies devoted to the performance of SRI,
compared to conventional benchmarks. The analysis shows that 40% of the studies reported an outperformance
of SRI comparing to conventional benchmarks, while 43% of the studies found that Social and Sustainable
investments do not have significant differences in performance comparing to traditional benchmarks. The rest of
the studies (17%) reported that SRI underperform. 17 Capelle-Blancard and Monjon (2012) investigated major
trends in literature on SRI by using a simple content analysis on relevant phrases. They conclude that the results
of the SRI performance research area is very data driven, as well as that there is a limited availability of respective
data sets. As we can see from Table 2, there is no definite answer whether SRI funds are under- or over-performing
conventional benchmarks. A number of studies suffer from small sample sizes and methodological issues.18
Moreover, only a few studies include cross-country and cross-region analysis.19 From a methodological point of
view, most of the studies use similar approaches to analyse the performance of SRI funds. However, it is important
to note that the same model could show different results depending on the quality of utilized proxies.20
To conclude, the current state of research regarding the topic of SRI funds’ performance have following gaps:
 Most of the earlier studies suffer from small data samples;
 Very few research papers perform the analysis of SRI funds’ performance on a global scale;
 Only few studies observe cross-country and cross-regional differences of SRI performance;

13
Gil-Bazo, Ruiz-Verdú, & Santos, 2010, p. 243-245.
14
Renneboog, Horst, & Zhang, 2008, p. 320-322.
15
Heal, 2008, p. 288.
16
Hamilton, Jo, & Statman, 1993, p. 62-66.
17
Von Wallis & Klein, 2014, p. 34-37.
18
Chegut, Schenk, & Scholtens, 2011, p. 17-18.
19
Renneboog, Horst, & Zhang, 2008, p. 320-322.
20
Chegut, Schenk, & Scholtens, 2011, p. 17-18.

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 Many studies cover the periods between 1990 and 2005; many research papers cover very short time
periods.
Table 2. Studies on the performance of Socially Responsible funds.

Author Region/ Time Sample Methodology Results

Country period
Schroeder, 2003 United States, 1990- 46 funds, Carhart 4-factor model Underperformance
Germany, 2002 10 indices
Switzerland
Beuer, Derwall & Canada 1994- 8 funds Jensen´s alpha, Carhart 4- Neutral
Otten, 2007 2003 factor model
Gil-Bazo, Ruiz- United States 1997- 86 funds Matching estimator approach, Outperformance
Verdu & Santos, 2005 Carhart 4-factor model
2010
Bauer, Koedijk & Germany, 1990- 103 funds Carhart 4-factor model Underperformance
Otten, 2005 United States 1993
United 1998- Outperformance
Kingdome, 2001
United States
Liedekerke, Moor Belgium 2001- 19 funds Conditional Carhart 4-factor
& Wallenhem, 2005 model Neutral
2007
Renneboog, Horst Global 1991- 440 funds Jensen´s alpha, Cross- Neutral
& Zhang, 2008 2003 sectional regressions, Fama-
French 3-factor, Carhart 4-
factor, Treynor-Mazuy models
Cortez, Silva & Europe, United 1996- 88 funds Jensen´s alpha, conditional Neutral
Areal, 2009 States 2007 multifactor model
Fernandez- Spain 2001- 13 funds Multi-factor regression model Outperformance
Izquierdo, 2008 with style benchmarks
Matallin-Saez,
2008
Capelle-Blancard France 2004- 116 funds Multi-factor regression model Neutral
& Monjon, 2011 2007

3. Contribution, research problem and questions

Considering the current state of research and identified research gaps, the aim of this research project is to
investigate the evolution of worldwide SRI markets (North-America, Europe, Asia-Pacific) and the cross-region
comparison of market development.
This thesis project is aiming to contribute to the existing literature in the following ways:
 Perform an up to date literature review regarding the Socially Responsible Investments in European,
North American and Asia-Pacific regions;
 Analyse and provide an update of the existing results of the SRI funds’ and indices´ performance studies
with the largest, to my knowledge, samples of 979 funds and 23 indices;
 Analyse the impact of various fund characteristics (as domicile, investment strategy and etc) on its
performance with a significantly larger sample than have been utilized in previous studies;
 Provide an update to the existing results on the performance of Socially Responsible Investment funds
and indices utilizing the latest data for the period of the last 10 years;
 Make a cross-country and cross-region comparison of the performance analysis of SRI funds and indices.
The empirical study will include the analysis of the performance and characteristics of SRI indices and equity
funds from European, North-American and the Asia-Pacific markets.

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The project has the following research questions:

 Do SRI equity indices significantly under- or outperform conventional indices?
 Do SRI mutual funds significantly under- or outperform relative to their benchmarks?
 Do the SRI investment strategy, the domicile of management, the size or the total expense ratio of the
funds have an effect on the performance of the funds?

4. Data
The empirical study of this research project is aiming to cover as many countries as possible from the North
American, European and Asia-Pacific regions.
The sample source for funds is yourSRI Database. After discussing the research project with the company’s
representatives, they kindly agreed to provide the data that they source at yourSRI Database. The data includes
identifiers (ISINs/Lipper Code), domicile, investment company name, currency, total assets, total expense ratio,
benchmark and SRI classification. Initial data sample contained 1845 funds from around the World. After
performing the initial cleaning and filtering of the whole dataset, the data sample decreased to 979 equity funds
that will be included in the final sample. The sample covers equity funds from the following 13 countries:
Australia, Canada, US, Austria, Belgium, France, Germany, Ireland, Liechtenstein, Luxembourg, Sweden,
Switzerland and United Kingdom (UK). The breakdown of the amount of funds in the sample by country is shown
in Table 3. The monthly time series of equity funds will be downloaded from Thomson Reuters DataStream
according to Lipper Code provided by yourSRI Database. As many previous studies have been criticised for the
short periods of investigation, the period under investigation in this research project will be 10 years (from January
2004 to December 2014). The benchmarks for the funds chosen by the fund managers are also provided by the
yourSRI Database and will be downloaded from Thomson Reuters Datastream, as well as risk-free rates needed
for the performance evaluation.
Table 3. Breakdown of the SRI funds sample by country.

Country Amount of Funds

Australia 18
Austria 45
Belgium 34
Canada 16
France 157
Germany 18
Ireland 45
Liechtenstein 13
Luxembourg 359
Sweden 16
Switzerland 37
United Kingdom 91
USA 130
Total 979

The dataset for the empirical analysis of SRI indices consist of 23 indices that be divided into two groups - regional
and country indices. The indices are constructed and published by the following providers: Dow Jones

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Sustainability Indices (DJSI); Financial Times Stock Exchange (FTSE); OMX AB (belongs to NASDAQ OMX
Group); Deutcshe Börse Group and STOXX Limited. The list of indices, its providers and the launch date is
shown in Table 4. Due to the different launch dates of the indices, the data availability is different and the analysis
will be done in two samples. One sample will cover the period of 10 years (from 2004 to 2014), the second sample
will have a shorter period of 6 years (from 2008 to 2015). The samples will be constructed according to data
availability. The benchmarks taken for SRI indices are the official benchmarks stated by the providers of the index
or accurately selected according to the regional scope and characteristics of the SRI indices. The monthly time
series data for all indices will be downloaded via Thomson Reuters Datastream.
Table 4. Description of Socially Responsible Indices.

Index Country/ Region Provider Launch Benchmark

Year
Country indices
FTSE4Good IBEX Index Spain FTSE 2008 FTSE Spain AC
Sarasin Sustainability Germany Index Germany Deutsche Börse 2007 DAX
Sarasin Sustainability Switzerland Index Switzerland Deutsche Börse 2007 SPI
FTSE4Good US Index US FTSE 2001 FTSE USA
FTSE4Good UK Index UK FTSE 2001 FTSE UK
FTSE4Good Japan Index Japan FTSE 2004 FTSE Japan
FTSE4Good Australia 30 Index Australia FTSE 2008 FTSE Australia
OMX GES Ethical Denmark Index Denmark OMX 2008 OMX Copenhagen PI
OMX GES Ethical Finland Index Finland OMX 2008 OMX Helsinki PI
OMX GES Ethical Norway Index Norway OMX 2008 Oslo SE All Share
OMX GES Ethical Sweden Index Sweden OMX 2008 OMX Stockholm PI
DJSI United States US DJSI 1999 DJ United States
DJSI Australia Australia DJSI 2004 S&P/ASX 200
DJSI Korea Korea DJSI 2006 S&P/KRX
Regional indices
FTSE4Good Global Index Global FTSE 2001 FTSE All-World
FTSE4Good Europe Index Europe FTSE 2001 FTSE Europe
OMX GES Ethical Nordic Index Nordic OMX 2008 OMX Nordic
DJSI World Global DJSI 1999 DJ World
DJSI Europe Europe DJSI 2001 DJ Eurostoxx
DJSI Eurozone Eurozone DJSI 2001 DJ Eurostoxx
DJSI North America North America DJSI 1999 FTSE North America
DJSI Asia Pacific Asia Pacific DJSI 2004 DJ Asia-Pacific TSM
STOXX® Global ESG Leaders Global STOXX 2001 STOXX® Global TM

5. Methodology
According to the literature review by Von Wallis and Klein (2014), most of the studies used similar methodologies
in order to investigate the performance of SRI. In more than 90% of the studies, authors performed a regression
analysis in addition of different factors that influence returns besides sustainable commitment. The most popular
approaches used in previous studies are one-, three-, or four-factor models, such as Capital Asset Pricing Model

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(CAPM), Fama–French, and Carhart.21 The CAPM is a common method to consider market beta as an explanatory
factor for asset price movements. Fama and French (1995) extend the CAPM by two additional factors, adding
size and book-to-market values in consideration to beta.22 The Carhart model was built on Fama and French
(1995), but with addition of one more factor, that captures the Jegadeesh and Titman momentum anomaly.23 For
example, the return difference of past one year winners and past one year losers.24 In addition to different
comparison methods, the studies also differ in choice of performance measures and benchmarks that they use.
Both of these factors are very significant when determining the performance of SRI products and their
conventional counterparts.
Based on the previous literature, monthly data is taken for the empirical study in order to avoid data noise and
outliers that frequently appear in daily or weekly data.25 This research project will utilize the following models in
order to perform SRI indices and funds’ performance analysis:
Jensen´s Alpha
𝑅𝑃𝑡 − 𝑅𝑓𝑡 = 𝛼𝑃𝑡 + 𝛽1 (𝑅𝐵𝑀𝑡 − 𝑅𝑓𝑡 ) + 𝜀𝑃𝑡 (Eq. 1)
Fama-French Model
𝑅𝑃𝑡 − 𝑅𝑓𝑡 = 𝛼𝑃𝑡 + 𝛽1 (𝑅𝐵𝑀𝑡 − 𝑅𝑓𝑡 ) + 𝛽2 𝑆𝑀𝐵𝑡 + 𝛽3 𝐻𝑀𝐿𝑡 + 𝜀𝑃𝑡 (Eq. 2)
Carhart Model
𝑅𝑃𝑡 − 𝑅𝑓𝑡 = 𝛼𝑃𝑡 + 𝛽1 (𝑅𝐵𝑀𝑡 − 𝑅𝑓𝑡 ) + 𝛽2 𝑆𝑀𝐵𝑡 + 𝛽3 𝐻𝑀𝐿𝑡 + 𝛽4 𝑀𝑂𝑀𝑡 + 𝜀𝑃𝑡 (Eq. 3)
Where
𝑅𝑃𝑡 -return of the fund at time t
𝑅𝑓𝑡 -risk free rate at time t
𝑅𝐵𝑀𝑡 -return of the benchmark at time t
𝛼𝑃 𝑡 -Jensen´s alpha for portfolio at time t
𝑆𝑀𝐵𝑡 -small and large cap portfolio return difference at time t
𝐻𝑀𝐿𝑡 -high book-to-market and low book-to-market ratio portfolios return difference at time t
𝑀𝑂𝑀𝑡 -past 1 year winners and losers portfolio return difference at time t
𝛽1 -systematic exposure to the benchmark
𝛽2 -sensitivity of portfolio to changes in small and large cap equity
𝛽3 -sensitivity of portfolio to changes in low and high book-to-market ratios
𝛽4 -sensitivity of portfolio to past winners and losers performance
𝜀𝑃𝑡 -random error term at time t
Additionally, a number of previous SRI performance studies perform a cross-sectional regression analysis in order
to test if factors as age, turnover and ethical status are linked to the performance. Therefore, a cross-sectional
regression will be conducted. Similar to Renneboog, Horst and Zhang (2008 p. 316-318), alphas will be regressed

21
Von Wallis & Klein, 2014, p. 21-23.
22
Fama & French, 1995, p. 131.
23
Jegadeesh & Titman, 1993, p. 65-66.
24
Carhart, 1997, p. 57.
25
Stenström & Thorell, 2007, p. 17.

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against other factors as management costs, fund management domicile, fund size and SRI investment strategy.
The obtained coefficients then will give an indication of how these factors are affecting the performance of funds.
The following model is used:
𝛼𝑖 = 𝛾0 𝐷𝐹𝑎𝑐𝑡𝑜𝑟− + 𝛾1 𝐷𝐹𝑎𝑐𝑡𝑜𝑟+ + 𝜀𝑖 (Eq. 4)
𝑎1 0 1
𝑎2 1 0
( … ) = 𝛾0 ( ) + 𝛾1 ( ) + 𝜀𝑖
… …
𝑎𝑖 1 0
Where
𝛼𝑖 - is an intercept of four-factor-adjusted return of an individual fund, in order to get this variable the Eq. 3 model
have to be run for each individual fund
𝛾0 - is the intercept that shows the average alpha of the funds that are not true (equal to 0) under the 𝐷𝐹𝑎𝑐𝑡𝑜𝑟+
𝛾1 - is showing the difference in the average alpha between all funds and the funds with true 𝐷𝐹𝑎𝑐𝑡𝑜𝑟+ variable
𝜀𝑖 - is a random error term

For example, if we want to investigate the impact of the country of domicile on the performance of funds. The
𝐷𝐹𝑎𝑐𝑡𝑜𝑟+ is equal to 1, if the domicile is e.g. Luxembourg, for all funds that management have domicile in other
countries 𝐷𝐹𝑎𝑐𝑡𝑜𝑟+ will be 0, but 𝐷𝐹𝑎𝑐𝑡𝑜𝑟− will be equal to 1. The statistical significance will be verified with a t-
test.

6. Structure
1. Introduction
1.1. Problem statement
1.2. Motivation
2. SRI history, development and practical approaches
2.1. History and definitions
2.2. SRI practical implementation
2.3. SRI Market
3. Literature review
4. Empirical study
4.1. SRI Indices
4.1.1. Data
4.1.2. Methodology
4.1.3. Results
4.2. SRI equity funds
4.2.1. Data
4.2.2. Methodology
4.2.3. Results
5. Conclusions

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7. Time plan
2 weeks Chapter 1 and 2 (2.1 and 2.2)
1 week SRI market review (2.3)
3 weeks Literature review (Chapter 3)
1 week Data gathering, cleaning and preparation
2 weeks Description methodology and possible adjustments
3 weeks Perform the calculations and describe the results
1 week Writing conclusions
2 week Proof-reading and formatting

8. Reference List
The reference list of this expose is a starting point for the bibliography of the Master Thesis research project. The
second chapter of the project, which is devoted to the history, the classification and applied practises in the SRI
industry, will require more research. There is still a large literature body to be reviewed in order to perform a
Literature review (Chapter 3). References for the literature used in this expose:

Association of the Luxembourg Fund Industry. (2015). Retrieved July 25, 2015, from http://www.alfi.lu/

Bauer, R., Derwall, J., & Otten, R. (2007). The Ethical Mutual Fund Performance Debate: New Evidence from

Canada. Journal of Business Ethics, 70(2), 111-114.

Bauer, R., Koedijk, K., & Otten, R. (2005). International evidence on ethical mutual fund performance and

investment style. Journal of Banking & Finance, 29(7), 1751-1767.

Bowman, E. H., & Haire, M. (1975). A Strategic Posture Toward Corporate Social Responsibility. California

Management Review, 18(2), 49-58.

Budde, S. J. (2008). Compelling returns: A practical guide to socially responsible investing (pp. 5-7).

Hoboken, NJ: John Wiley & Sons.

Button, J. (1988). A dictionary of green ideas: Vocabulary for a sane and sustainable future (pp. 10-15).

London: Routledge.

Capelle-Blancard, G., & Monjon, S. (2011). The Performance of Socially Responsible Funds: Does the

Screening Process Matter? Finance and Corporate Governance Conference 2011 Paper. 1-51.

Carhart, M. M. (1997). On Persistence in Mutual Fund Performance. Journal of Finance,52(1), 57-82.

Retrieved from http://ssrn.com/abstract=8036

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Chegut, A., Schenk, H., & Scholtens, B. (2011). Assessing SRI fund performance research: Best practices in

empirical analysis. Wiley Online Library, 1-18.

Cortez, M. C., Silva, F., & Areal, N. (2009). The Performance of European Socially Responsible

Funds. Journal of Business Ethics, 87(4), 573-588.

Cowton, C. J. (1994). The development of ethical investment products. Blackwell Finance, 213-232. Retrieved

from http://philpapers.org/rec/COWTDO-2

EUROSIF A.I.S.B.L. (2014). European SRI Study - 2014. Retrieved from

http://www.EUROSIF.org/publication/european-sri-study-2014/

Fama, E. F., & French, K. R. (1995). Size and Book-to-Market Factors in Earnings and Returns. The Journal of

Finance, 50(1), 131-155. Retrieved from http://www.jstor.org/stable/2329241

Fernandez-Izquierdo, A., & Matallin-Saez, J. C. (2008). Performance of Ethical Mutual Funds in Spain:

Sacrifice or Premium? Journal of Business Ethics, 81(2), 247-260.

Gil-Bazo, J., Ruiz-Verdú, P., & Santos, A. A. (2010). The Performance of Socially Responsible Mutual Funds:

The Role of Fees and Management Companies.Journal of Business Ethics, 94(2), 243-263.

Global Sustainable Investment Alliance. (2014). Global Sustainable Investment Review - 2014. Retrieved from

Global Sustainable Investment Alliance website: http://www.gsi-alliance.org

Hamilton, S., Jo, H., & Statman, M. (1993). Doing Well While Doing Good? The Investment Performance of

Socially Responsible Mutual Funds. Financial Analysts Journal, 49(6), 62-66.

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 SRI
performance of indices and funds

Appendix 3. The classification of SRI funds. Self-depicted by the author.26

Responsible Investing

ESG Cross- Ethics Cross-

Esg Environment eSG Social esG Governance
sectoral sectoral

RI positive Climate change and

Microfinance funds Engagement Faith-based funds
screening Renewable energy funds

Environmental and Social entrepreneurship Sharia-compliant

RI negative Ecological funds and Solidarity funds funds
screening

Carbon funds Social impact

Sustainable forestry
funds

Sustainable water funds

26
Association of the Luxembourg Fund Industry, 2015.

15