There is ample evidence to show that Socially Responsible Investing (SRI) investments outperform non-SRI investments. A study conducted in China on four of its best SRI funds showed that SRIs perform better than non- SRIs regarding the riskiness of the investment and the corresponding dividends (Zhang, 2014). The investments considered were done in the Biology, pharmaceuticals as well as the food and beverage industries. However, the SRI investments in the finance and insurance sectors unperformed leading the analysts to conclude that SRIs are best done for the Fast Moving Consumer Goods (FMCG) industry.
SRIs perform better than non-SRIs when considering the performance of socially responsible mutual funds. A consideration of 86 such funds showed that the average before-and after-performance of SRI funds was higher than that of conventional or non- SRI funds. Notably, the SRI's managed by professionals and specialists outperformed the non-SRIs which were under the management of generalists.
The Spanish retail SRI funds also show that the SRIs outperform non-SRIs. An investigation conducted from 1998 to 2001 showed that SRIs achieved similar or more profitability than the non- SRIs. A further investigation of about 36 faith-based SRIS studied from 2001 to 2008 also showed that they outperformed the overall market (S&P 500) and other categories of SRIs (Sjöström, 2011). As such, some of the SRIs tend to perform better than others, and it is not guaranteed that all SRIs can outperform non-SRIs especially when they are dealing in a market alien to their operations and convictions.
A report by the RBC Global Asset Management (2012) also asserts that SRIs outperform non- SRIs. The study asserts that four distinct bodies of research support their assertion. These are the performances relative to traditional market indices, relative performance of hypothetical SRI stock portfolios against conventional portfolios, SRI mutual funds to traditional indices and consideration of corporate social responsibility and improved financial performance (Sjöström, 2011).
SRIs perform better than non-SRIs as evidenced by considerations of research in Spain, China and the US. The placement of specialists in management improves the management of the SRIs. Moreover, the SRIs seem to perform better when associated with FMCGs. In all it is not a guarantee that SRIs outperform non-SRIs but such performance is also based on external market and economic forces.
References
RBC Global Asset Management (2012). Does Socially Responsible Investing Hurt Investment Returns? Retrieved 31 March 2016 from http://funds.rbcgam.com/_assets- custom/pdf/RBC-GAM-does-SRI-hurt-investment-returns.pdf
Zhang, T. (2014) Do Socially Responsible Investment Funds Under-Perform the Market? Evidence from China. International Journal Management Research & Business Strategy. Vol. 3, No. 1, January 2014. Retrieved 31 March 2016 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2512602
Sjöström, E. (2011) The Performance of Socially Responsible Investment
A review of scholarly studies published 2008‐2010. AP7, Stockholm, Sweden. Retrieved 31 March 2016 from http://www.gruenesgeld.at/downloads/The-Performance-of-SRI.pdf
