The Performance of Socially Responsible Investment: A Study of the French Market

Bankers, Markets & Investors, N.106 - May - June 2010

Socially responsible investment (SRI) has grown considerably since 2000 and it is now being proposed to the general public. SRI selects assets in a restricted universe and focuses only on those assets that meet certain social and ethical conditions. So it is legitimate to wonder if this restriction penalises fund performance or indeed if the selection of socially responsible assets makes up for this restriction by rewarding the investor with something other than the satisfaction of occupying the moral high ground. The search for an answer to this question has led to extensive research on SRI funds in various countries. Our aim is to contribute to this research by examining SRI funds distributed in France, home to one of the largest markets for SRI in continental Europe. We use factor models to measure the alpha generated by SRI funds. Our findings - that is, that SRI security selection does not produce positive alpha - are in line with those of previous research using similar models.