Is socially responsible investing (SRI) in stocks a competitive capital investment? A review of the literature and a comparative analysis based on the performance of sustainable stocks

Socially Responsible Investing (SRI) has become an increasingly relevant issue in the last decades. Most research focuses on SRI mutual funds but rarely on green stocks. Investing directly in stocks can have different advantages compared to investments in mutual funds. This chapter reviews empirical findings on SRI and its competitiveness and questions whether investments in green SRI stocks perform as well as conventional investments or not. Analyzing two different timeframes (3-year-periods and 5-year-periods), our results indicate that our sustainable portfolio does not perform significantly different from a conventional one in the shorter timeframe (three years), suggesting better performance of the conventional one in the midterm. In sum, our results indicate that the consideration of sustainable criteria does not negatively influence the investment result and could be applied by investors without having to sacrifice returns.