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Socially Responsible Investment Funds—An Analysis Applied to Funds Domiciled in the Portuguese and Spanish Markets

Author

Listed:
  • Luísa Carvalho

    (ISCAP, Polytechnic of Porto, 4200-465 Porto, Portugal)

  • Carlos Mota

    (CEOS.PP, ISCAP, Polytechnic of Porto, rua Jaime Lopes Amorim, São Mamede de Infesta, 4465-004 Porto, Portugal)

  • Patrícia Ramos

    (CEOS.PP, ISCAP, Polytechnic of Porto, rua Jaime Lopes Amorim, São Mamede de Infesta, 4465-004 Porto, Portugal
    INESC TEC, Campus da FEUP, rua Dr. Roberto Frias, 4200-465 Porto, Portugal)

Abstract

Socially responsible investments, also referred to as ethical or sustainable investments, have experienced rapid global growth in recent years. They represent an investment approach that incorporates social, environmental, and ethical considerations into decision-making processes. Consequently, the significance of socially responsible investments has captured the attention of academics, prompting inquiries into the impact of integrating social criteria on portfolio performance. The primary objective of this work was to conduct a comparative study of the performance between socially responsible and non-socially responsible investment funds, using funds domiciled in Portugal and Spain. Various multi-factor models, including the three-factor model of Fama and French, the four-factor model of Carhart, and the five-factor model of Fama and French, were employed to assess performance. The sample comprised 125 investment funds, with 43 identified as socially responsible and 82 as non-socially responsible. The study’s findings indicate that there are no significant differences between socially responsible funds and their conventional counterparts. The majority of funds experience performance alterations during periods of crisis compared to crisis-free periods. Additionally, when comparing non-conditional models with conditional models, an improvement in the explanatory power of the latter is observed. This suggests that the inclusion of the dummy variable enhances the quality of fit for the models.

Suggested Citation

  • Luísa Carvalho & Carlos Mota & Patrícia Ramos, 2024. "Socially Responsible Investment Funds—An Analysis Applied to Funds Domiciled in the Portuguese and Spanish Markets," Risks, MDPI, vol. 12(1), pages 1-19, January.
    • Handle: RePEc:gam:jrisks:v:12:y:2024:i:1:p:9-:d:1312106
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    References listed on IDEAS

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    1. Saiful Arefeen & Koji Shimada, 2020. "Performance and Resilience of Socially Responsible Investing (SRI) and Conventional Funds during Different Shocks in 2016: Evidence from Japan," Sustainability, MDPI, vol. 12(2), pages 1-20, January.
    2. Broadstock, David C. & Chan, Kalok & Cheng, Louis T.W. & Wang, Xiaowei, 2021. "The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China," Finance Research Letters, Elsevier, vol. 38(C).
    3. Nofsinger, John & Varma, Abhishek, 2014. "Socially responsible funds and market crises," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 180-193.
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