Performance of Socially Responsible Investment Funds against an Efficient SRI Index: The Impact of Benchmark Choice when Valuating Active Managers

Bankers, Markets & Investors, N.117 - March - April 2012

This paper conducts a performance measurement of SRI funds and assesses the impact of changing the reference from a standard SRI index to an efficient SRI index. The analysis of fund performance shows that an efficient SRI index raises the bar for actively managed SRI funds. While about 62% of funds have a positive information ratio when compared to the cap-weighted EuroStoxx Sustainability Index, only about 36% of funds do so with respect to the Efficient SRI Index. It is also interesting to note that the median information ratio across funds is slightly positive (0.04) when using the standard SRI index, but it is more clearly negative (-0.12) when using the Efficient SRI index.