Socially Responsible Investment (SRI) : does being social pay off?

• Autor(a) principal: Schilin, Roman
• Data de Publicação: 2019
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/29296
• topic: Socially responsible investment; Investment strategy; Corporate social responsibility; Sin stocks; Investimento socialmente responsável; Estratégia investimento; Responsabilidade social corporativa; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

Considering social aspects into the investment decision has become of increasing importance for financial institutions. This dissertation applies multiple screening methodologies with the aim of reflecting the profile of a social investor to identify whether an ethical investment approach is compatible with achieving superior financial performance. For the positive screening methods, the dissertation applies the Thomson Reuters ESG score and its sub-components as an indicator for corporate social performance. The S&P 500 index serves as the investment universe, and its constituents are categorized into deciles, and value-weighted portfolios are created upon them. The lowest- and highest-rated portfolios are analysed. The negative screen excludes companies involved in controversial business areas from the investment universe. Their cumulative returns are compared to the index performance over the investment period from 2003 until 2018, while controlling for the influence of the Carhart four-factors. The analysis reveals that socially responsible portfolios result in negative Alphas, indicating that ethical goals cannot be achieved without hurting the financial performance. Ethical companies show a substantially higher market capitalization, resulting in negative SMB factors which contribute to the underperformance of the social portfolios. Sin Stocks do majorly drive the abnormal returns of the low-rated portfolio, and their exclusion eliminates its outperformance to the index. The goal of creating a social investment strategy providing abnormal returns was not reached.