Is Socially Responsible Investing More Risky? Australian Evidence

Mackie, Ewan and Palit, Imon and Veeraraghavan, Madhu and Watson, John (2017) Is Socially Responsible Investing More Risky? Australian Evidence. In: Sustainability and Social Responsibility: Regulation and Reporting. Springer, pp. 261-306. ISBN 978-981-10-4502-8

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Abstract

Prior studies, which analyse the performance of socially responsible investments (SRIs) compared to conventional funds, have thus far ignored the assessment of risk. In response to this identified lack of research, we make a major attempt to fill the void by investigating whether daily returns of Australian equity socially responsible investment funds have different tail risk exposure in the return distribution compared to matched conventional equity funds. The Australian funds management industry provides a natural setting within which to study the risk exposure of SRI funds. The Australian funds management industry has one of the largest and fastest growing funds management sectors in the world. This growth is underpinned by Australia’s government-mandated retirement scheme. In addition, Australia is the first country to introduce regulations that require issuers of financial products and financial advisors to disclose and advise on ethical, social, and governance (ESG) considerations. Using a sample of 26 funds spanning the period 1998–2013, we establish several new findings. First, in assessing tail risk exposure we observe no evidence of significant difference in riskiness amongst socially responsible investment compared to that of conventional funds with similar investment styles. Second, when comparing two downside risk measures across socially responsible and matched conventional funds, namely Value-at-Risk and expected shortfall, we find that return distributions amongst Australian funds do not exhibit particularly heavy tails. Taken together, we show that investors do not pay a penalty (in terms of higher risk) to invest ethically.

Item Type:	Book Section
Uncontrolled Keywords:	Socially responsibly; investment Risk Value-at-Risk; Expected shortfall
Subjects:	Finance
Divisions:	Finance and Strategy
Depositing User:	Mr Ramesh Kamath
Date Deposited:	08 Sep 2018 10:59
Last Modified:	12 Sep 2018 11:12
URI:	http://tapmi.informaticsglobal.com/id/eprint/11

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