Responsible Investment

Is there a cost to being socially responsible in investing?

January 30, 2008
Image ‘Windscreens and Lights’ by Tina Guan (CC BY-NC-ND 2.0)

In his paper, “Is There a Cost to Being Socially Responsible in Investing?”, Guerard examines the returns of Vantage Global Advisors’ 1,300 stock unscreened universe and a 950 stock screened universe to determine if the returns are different at the 5% level of significance. They are not. He finds that a composite model using value and growth variables produces an expected return ranking list that generates equivalent excess returns in socially-screened and unscreened portfolios.

Guerard comments that these [social] “criteria do not “cost” the investor any meaningful average return during the 1987-1994 period and may have produced positive active (relative to the S&P 500) returns during some sub periods.” He also states that “Vantage’s experience indicates that it is not “dumb” to be a socially conscious investor.”

This paper won the 1996 Moskowitz Prize competition, awarded by the Social Investment Forum. The Moskowitz Prize, which in 2004 became an initiative of the Center for Responsible Business at the University of California, Berkeley, promotes the concept, practice, and growth of socially responsible investing.

References

This article may be reproduced according to our terms of use with attribution (and link, if online) to www.tias.edu. To be cited as: “Is there a cost to being socially responsible in investing?”, John B. Guerard, www.tias.edu, January 30, 2008.

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