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Socially responsible investments: doing good while doing well in developed versus emerging markets?

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  • Lestari, Jenjang Sri
  • Frömmel, Michael

Abstract

We investigate the performance of Socially Responsible Investments (SRI) in both developed and emerging countries. We do so by examining the performance of self-constructed equity portfolios based on SRI's mutual funds' current and historical holdings. Based on the current holdings, the SRI equity portfolios from emerging and developed countries significantly outperform their benchmarks, except for the Japanese stock portfolio. We mitigate the current holdings approach's potential look-ahead and survivorship bias by employing the historical holdings approach. The results change dramatically in developed markets: the outperformance of SRI is not significant in the U.S. – the dominant developed markets in the sample – and Japan. In emerging markets, the SRI's outperformance remains significant. It outperforms in both BRICS and Non-BRICS, and in terms of income, it consistently outperforms in the markets of middle-income countries.

Suggested Citation

  • Lestari, Jenjang Sri & Frömmel, Michael, 2024. "Socially responsible investments: doing good while doing well in developed versus emerging markets?," Research in International Business and Finance, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:riibaf:v:69:y:2024:i:c:s0275531924000217
    DOI: 10.1016/j.ribaf.2024.102229
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    More about this item

    Keywords

    Socially Responsible Investment (SRI); Developed markets; Emerging markets; BRICS; Mutual fund holdings; Current holdings; Historical holdings; Look-ahead bias; Survivorship bias;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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