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Performance of Socially Responsible Investment Funds against an Effi cient SRI Index [extrait BMI 117]

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This paper conducts a performance measurement of Socially Responsible (SRI) funds and assesses the impact of changing the reference from a standard SRI index to an efficient SRI index. While usual SRI indices simply weight SRI-screened stocks by market cap, or sustainability scores, efficient SRI indices apply an optimal weighting scheme to the SRI screened universe. The analysis of fund performance shows that an efficient SRI index raises the bar for actively-managed SRI funds. While about 60% of funds have a positive information ratio when compared to the cap-weighted EuroStoxx Sustainability Index, only about 25% of funds have a positive information ratio with respect to the Efficient SRI Index. It is also interesting to note that the median information ratio across funds is slightly positive (0.05) when using the standard SRI index, but clearly negative (-0.22) when using the Efficient SRI index. Given that such efficient SRI indices are also easy to replicate at low cost, they constitute investable alternatives to actively managed funds.

Auteurs :Le Sourd Véronique
Extrait de la revue BMI 117


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