'Best in class' socially responsible investment. The actual performance evaluation between the US and Europe. (3rd April 2022)

• Record Type: Journal Article
• Authors: Burchi, Alberto; Włodarczyk, Bogdan
• Is Part Of: Journal of sustainable finance & investment. Volume 12:Number 2(2022)
• Page Start: 275
• Page End: 298
• Publication Date: 2022-04-03
• Subjects: Socially responsible investments (SRIs) -- environmental -- social and corporate governance (ESG) -- portfolio optimization; Social responsibility of business -- Periodicals; Sustainable development -- Finance -- Periodicals; 332
• DOI: 10.1080/20430795.2020.1742012
• Languages: English
• ISSNs: 2043-0795

Abstract

ABSTRACT: This study investigates the realized performance of socially responsible investments (SRIs) in US and in European financial markets. We simulate a real investment strategy based on continuous portfolio optimization in the risk-return space. We assume the role of an investor who bases his or her choices on a 'best in class' approach. We evaluate performance using the actual returns achieved by these strategies. Our results show that the socially responsible investor must pay a cost in terms of a lower investment-risk premium according to his or her appetite for risk and geographical area. In the US, SRI investments yield lower returns than non-SRI investments; in Europe, SRI investments yield lower returns and more volatility. Finally, SRIs have greater capacity to reduce risk in terms of both losses and recovery speed.