Socially responsible stock funds in Brazil

Abstract

Purpose – The purpose of this paper is to examine the risk-adjusted performance of Brazilian SRI stock funds. Design/methodology/approach – Risk-adjusted performance of 11 Brazilian socially responsible investment (SRI) funds relative to local index funds and matched pairs of funds. Findings – SRI funds performed as well as portfolios representing the broad market on a risk-adjusted basis, both before and during the global financial crisis. Independent investment houses are not interested in SRI funds. Large financial conglomerates may see these funds as part of their corporate social responsibility image strategy. Research limitations/implications – Brazilian SRI funds are a very small niche in the stock mutual fund universe of the country, thus, the small sample (universe) of SRI funds, as far as the author's knew. One cannot say that independent asset managers do not include SRI screening in their stock selection criteria. The use of SRI screening by the most prominent independent asset managers is a potential topic for future research. Practical implications – Brazilian SRI funds did not represent an extra screening filter cost to their investors. The majority of asset managers do not consider this strategy important enough to deserve an exclusive vehicle. Social implications – As SRI funds did not posit an extra screening cost, they may deserve a greater share of the mutual fund market, stimulating more SRI. Originality/value – The performance of Brazilian SRI stock funds had not been examined in the international literature. Brazil has vast natural resources, a very large economy and the fourth largest mutual fund industry in the world, but was overlooked.