Socially Responsible Investing - An Emerging Concept in Investment Management

Abstract

Socially Responsible Investing (SRI), which integrates social and environmental criteria into traditional investment decision process, has emerged as a new concept in investing, especially in the wake of growing concerns for corporate social responsibility. This paper provides an extensive review of literature on the performance of socially responsible investing. We find that almost in every study related to performance evaluation; socially responsible funds/companies perform better or at least not inferior to conventional funds or respective benchmarks. We also find that costs of socially responsible investing were less than or equal to conventional funds. So, there is no penalty for investing in socially responsible stocks. Rather, it is more rewarding especially during the time of financial crisis. The important implication of our review is for investment decisions as investors may start investing in socially responsible companies to reap higher returns at lower risk. We also expect that for SRI/green investment promotion, more and more socially responsible mutual funds or green mutual funds would be launched in India in near future.