Is Performance the Key Issue in SRI Funds? Conclusion and Lessons Learned from Three Decades of Studies

Abstract

This paper conducts a systematic literature review of primary studies that analyze the relative performance of SRI Equity investment funds vs their conven tional counterparts. The existing literature is analyzed and categorized in two sam ples depending on the benchmark used. Based on our research of the period between 1992 to July 2021 we arrive at a total sample of 54 papers. We can conclude that the vast majority (67%) of the empirical studies show no difference or a not statis tically significant difference in the relative financial performance of SRI funds. We analyze trends in the literature and suggested “best practices” (sample size, period of the analysis, and use of multifactor measures). For the studies that use conven tional funds as a benchmark, we analyze the use of the matched pair and the number of matching criteria. For studies that use an index as a benchmark, we observe dif ferences between studies that use conventional indices, SRI indices, or both. The results suggest that performance may not be the key issue. We conclude with a de bate on critical issues: ESG as a risk management tool, the relevance of the screen ing process of SRI funds, holding analysis, regulation or skills, and timing abilities of fund managers