Socially responsible investment, should you bother?

Abstract

Companies included on a sustainability index meet several criteria based on an assessment of their economic, environmental and social practices. Each of these companies satisfies a different number of criteria and these standards can be quite different in quality and rigor. In this sense, RobecoSAM provides a Corporate Sustainability Assessment of the companies included in the Dow Jones Sustainable Index. The three proposed classes (Gold, Silver and Bronze) can be considered as social responsible (SR) ratings. Therefore, we examine the financial performance of portfolios composed of stocks according to these ratings. We assume that highly conscious SR investors could base their portfolio decision-making process on these SR ratings. From an extensive dataset, our results show that SR investments not only have no cost for investors but also outperform the market. Additionally, there are no significant differences among SR portfolios depending on the SR rating.