Socially responsible: Are they profitable?

Socially responsible: Are they profitable?

Accepted Manuscript Title: Socially Responsible: Are they Profitable? Author: Ali Murad Syed PII: DOI: Reference: S0275-5319(16)30517-7 http://dx.doi...

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Accepted Manuscript Title: Socially Responsible: Are they Profitable? Author: Ali Murad Syed PII: DOI: Reference:

S0275-5319(16)30517-7 http://dx.doi.org/doi:10.1016/j.ribaf.2017.07.090 RIBAF 780

To appear in:

Research in International Business and Finance

Received date: Accepted date:

30-12-2016 3-7-2017

Please cite this article as: Syed, Ali Murad, Socially Responsible: Are they Profitable?.Research in International Business and Finance http://dx.doi.org/10.1016/j.ribaf.2017.07.090 This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.

Socially Responsible: they Profitable?

Are

Ali Murad Syed* Ali Murad Syed * Assistant Professor University of Dammam Dammam, Saudi Arabia [email protected] Tel: +966 549 67 20 21

Introduction: The origin of social investing is traced back hundreds of years when some religions restrict their followers to investing in enterprises pursuing unlawful and unethical activities such as production of alcohol, cigarettes and gambling. At modern times investors started considering ethical and environmental criteria’s for investment after industrial revolution and rapid changes in the global political climate. During recent era environmental concerns (e.g. air pollution, wastage of natural resources etc) and political conditions, for instance human rights, armed conflicts in Vietnam, Afghanistan and other countries attract the attention of investors towards non-financial criteria for investing in mutual funds. In the 1970s, it was the rise of the women’s movement, as well as environmental and labor issues. The evolution of socially responsible investments in mutual funds started in 1975 when stockbroker Amy Domini noticed the preference of non-financial gains as well as financial gains by her clients. As time goes on, she gradually realized the importance of

incorporating ethical criteria of investing in mutual funds. She stressed that the role of stockbroker could be more than looking for financial gains of investing. Pioneers of ethical investing started faith based rejection of sin stocks such as gambling, weapons alcohol, and cigarettes. In the 1980s, demands to divest from investments in the South Africa of apartheid came to the fore, as did environmental issues even more than previously (in particular after the Chernobyl and Exxon Valdez catastrophes). Socially responsible funds prospered increasingly through the 1990s and the following decade. Thus integrating ethics and moral values into investment decisions is called Socially Responsible Investing (SRI).More recently, modern SRI investors have been influenced by factors that fall into three main categories: social, environmental, and ethical (Knowledge 2007). Recently SRI funds shows impressive growth on global and European scale for example global SRI funds’ assets under management were around US$ 13.6 trillion representing 21.8% of total assets under management1. While total SRI funds’ assets under management (AuM) in Europeare,$8.758 trillion also with 65% share in global SRI investment funds for year 2011 it shows growth of 35% since 2009. The UK is one of the most dynamic centers for SRI with total of SRI €4.6 trillion AuM for UK and overseas clients. While France is still far behind the UK on this score, it has recently been one of the fastest growing markets. As of December 31, 2011, the French market of SRI assets had grown to almost €115 billion and shows increase of 127% from 2009 figure of € 50.7 billion. Academics show keen interest in ethical investing and its implications. The theoretical debate about socially responsible investments started and considered different dimensions of ethical investing such as some authors checked altruism, stakeholder, diversification, and performance characteristics. Financial performance of socially responsible investments is the hot topic among academics in this area. The main reason 1

http://gsiareview2012.gsialliance.org/pubData/source/Global%20Sustainable%20Investement%20Alliance.pdf

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for this is that mostly studies applied different estimation techniques on distinct datasets of different countries and shows inconsistent results about financial performance of SRI funds. SRI funds grew substantially during booming markets, assuming they indeed proved to both financially and morally satisfy their investors and ameliorate corporate behavior, what happens when there is financial meltdown and economic recession? In this study, we contribute towards existing body of literature in two ways. First, we compared the UK and French SRI funds’ performance because these two countries almost have identical regulatory environment but different corporate governance systems. Secondly, we compare the both in good and hard times, and compare SRI performance during the crisis to its history. Further, we will explore the performance of ethical investing before and during crisis period in both countries, which is as per authors’ knowledge ignored in the existing body of literature. In conclusion, the purpose of this study is to present an empirical study seeking to test the performance of SRI funds in the UK and in France both before and during the financial crisis. Overall, we find that socially responsible funds are not significantly different from conventional funds with respect to performance however; there is some evidence that SRI funds are less risky than the benchmarks in France and the UK. Result of this study is important for investors that they can invest in SRI funds without any penalty. The remainder of this study is as follows. Section 2 presents the review of literature; Section 3 displays the methodology and the data while section 4 explores the analysis and discussion of results while limitations of the study conclude. Literature Review Existing literature includes several studies on financial gains from socially responsible investing. Academics started the discussion of firms’ performance with good social records compared to other firms. Academics emphasized the under or over performance of socially responsible investments such as less diversification of portfolios of socially

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responsible investments leads to poor performance because of less investment opportunities (Renneboog et al. 2008, Mill 2006). Some authors argued that ethical investing have some costs that investor pays for getting non-financial gains they also stressed that ethical investors are less sensitive to financial returns (Benson and Humphrey 2008, Plantinga and Scholtens 2001). On the other hand, one could object that the screening process used by SRI funds might generate higher returns due to better quality information and better screening of best practices and better managed firms in which investments are made. A key ingredient of socially responsible investing is how stocks are screened (Cortez et al. 2009). Screening based on social and environmental performance could signal good managerial quality and therefore good financial performance, eliminating costly social crisis or environmental disasters (Fernandez-Izquierdo and Matallin-Saez 2008). Seminal study on this topic is from Moskowitz (1972) conducted on socially responsible investments and his work is extended by academics but finds inconclusive evidence. Most studies tested the direct relationship between social responsibility and financial performance of the firms. They think that green investments perform better because of sustainability and better governance. Fund managers of socially responsible investments require non-financial gains as well as financial advantages. They are less concerned about returns of the stocks. The studies use different methods ranging from simple onefactor models to three and four factor models with time-varying coefficients investigate funds of different countries and analyses different times. Luther et al. (1992) studied the performance of UK SRI funds against a benchmark index. They regress the returns of the fund and calculate the Jensen’s alpha2. They do not find clear evidence of out or under performance of the funds relative to the benchmark indices. Luther and Matatko (1994) extended this study by trying to solve the benchmark problems using small cap and blue chip index as due to screening process small firms are included in the sample. 2

Jensen´s Alpha used to determine the abnormal return of a security or portfolio of securities over the theoretical expected returnpredicted by the capital asset pricing model (CAPM).

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The empirical results again show no clear sign of significant out or under performance of the SRI funds. Mallin et al. (1995) solve the screening problem by with matched samples considering size and date of formation and they find mild evidence that ethical trust fund outperform conventional funds. Gregory et al. (1997) claims that using two benchmarks help to deal with size effect when they used two benchmarks over performance of SRI funds vanish consistent with Gregory and Whittaker (2007). Scholtens (2005) conducted research on Dutch socially responsible funds’ performance and finds no statistically significant difference in performance of SRI and conventional funds. Hamilton et al. (1993) investigate 17 SRI funds using the simple regression of the excess returns of all stocks listed at the New York Stock Exchange. Only one out of the 17 funds has a significantly positive estimate for Jensen’s alpha, whereas all other estimates are insignificant. Statman (2000) conducted study on Domini 400 Social-index (DSI) and the performance of 31 U.S. investment funds. Most of the 31 SRI funds have a similar performance as the S&P 500 index and the DSI index. There are only few funds with a significant under-performance. These results in an underestimate of the true performance of the funds because of transaction costs. To solve this problem, Statman used matching approach to compare the SRI funds with conventional funds. Some researchers perform comparative analysis for instance Kreander et al. (2005)considered SRI funds in seven European countries and shows that performance of socially responsible funds is similar to conservative funds. He also argued about market timing strategy of green investors. In this comparative study they do not considered biasness due to benchmark problems. Schröder (2003) investigates the performance of SRI equity investment funds and equity indices of 16 German and Swiss funds and 30 US funds. The author uses Jensen’s alpha as a performance measure. Findings shows that most of the SRI assets have a similar performance as their corresponding benchmarks. Only few funds and indices exhibit a relatively poor performance and these findings are consistent with Schröder (2007). Bauer et al. (2002) applied multi-factor Carhart model

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on comparison of 103 German, UK and US ethical mutual funds. After controlling for investment style, they find little evidence of significant differences in risk-adjusted returns between ethical and conventional funds for the period from 1990-2001. Plantinga and Scholtens (2001)also applied the multi-factor Carhart model but the authors solve the benchmark problem of 103 German, UK and US ethical mutual funds. After controlling for investment style, they find little evidence of significant differences in risk-adjusted returns. After controlling for investment style, the authors find little evidence of significant differences in risk-adjusted returns.Renneboog et al. (2008) compared the all SRI funds across the world (US, the UK, and in many continental European and AsiaPacific countries). They showed that SRI Funds underperform their domestic benchmarks. However, with the exception of some countries such as France, Japan and Sweden, the risk-adjusted returns of SRI funds are not statistically different from the performance of conventional funds. However, no existing study tested the performance hypothesis by comparing the UK and French SRI funds before and during the financial crisis. Therefore, this study fulfills the gaps in the literature by studying performance of socially responsible and conventional funds before and during recent crisis and conducting comparison of UK and French ethical funds. The implications of this study will guide the investors about ethical investing during financial difficulties. Research Design and Methodology The Data We selected 17 SRI French funds and 27 British SRI funds (Annex 1). These funds include major asset management companies from France and the UK. Our proxy/benchmark for French funds is the DJ EURO STOXX 50 Index and for UK, SRI funds the FTSE All-Share Index. These two indices represent better market proxies than any other index for these two countries. Our analysis for the pre-crisis period covers 3 years, from July 2004 to June 2007. The crisis period covers 1 year and 11 months, from July 2007 to May 2009. Government 90 day T-bills from respective countries are

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considered to represent risk free rates for the respective periods of the French and UK Funds. The fund prices and benchmark prices are mid-market closing prices net of all costs, and were taken from Thomson DataStream. The list of French SRI funds is taken from Novethic, which is a private, independent French social rating agency and the leading research and expertise center in France. Some of the data has been collected from the respective management companies operating these SRI funds. Methods In order to measure financial performance, we have calculated for each of these funds daily returns, the Sharpe ratio, the modified Sharpe ratio, Beta, Jensen’s Alpha, and Treynor. The Sharpe ratio SRi of a fund i is commonly determined by employing the mean ēriand standard deviation si of the fund excess returns, which are calculated as the difference between the total return of the fund ri and a risk free short-term interest rate rf. SRi = ēri (1) Si We do however have to deal with some conceptual problems that arise because of the crisis. The Sharpe ratio is one of the most commonly used measures to evaluate portfolio and mutual fund performance. The fund exhibiting the highest Sharpe ratio will also attain the highest average return when combined with a risk free asset for any level of risk. However, there is an ongoing debate as to whether the Sharpe ratio is appropriate for assessing the performance of funds in abnormal periods, i.e. when average excess returns of funds are negative. Some researchers believe that the Sharpe ratios are very hard to interpret when they are negative, that they do not offer reasonable rankings of funds in bear markets (Jobson and Korkie 1981);(Israelsen 2005). Sharpe ratio use as a measure of performance is also intuitively justified through the idea that when two funds have identical mean excess returns, the fund with the lower standard deviation exhibits a superior performance (Akeda 2003). In declining markets,

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however, the Sharpe ratio leads to a reversed ranking. With identically negative excess returns, the fund with higher total risk shows a higher (less negative) Sharpe ratio. Plantinga (1999) states: “For negative Sharpe ratios, the ranking is consistent with a riskseeking investor.” This rejection of the Sharpe ratio stands opposed to a justification by (Sharpe 1975). These papers argue that it is not the positions of funds that are being directly compared, but the risk-adjusted combinations of each fund with borrowing or lending at the risk-free interest rate. Therefore, the highest Sharpe ratio is shown for a fund with the highest average excess return attainable for any risk level, even in a bear market. The Sharpe ratio for a population p, based on historical returns, is defined as Sb = RP – RF (2) δP Where RF is the risk free rate of the market, RPis the mean return of the portfolio; δP is the standard deviation of return for the portfolio. The numerator of the Sharpe measure is the portfolio’s mean return minus the mean return on the risk-free asset over the sample period. The RP – RF return measures the extra reward that investors receive for the added risk taken. This difference is the mean excess return, per unit of risk, as measured by standard deviation of return. Those risk-averse investors who make decisions only in terms of mean return and standard deviation of return prefer portfolios with large Sharpe ratios to those with smaller Sharpe ratios. The Sharpe ratio is a mainstay of performance evaluation. Scholz and Wilkens (2008) show that the Sharpe ratio is determined not only by the efficiency of fund managers but also by the respective market climate. They show that the latter influence could have a large impact on performance measurement both in theoretical and empirical research. In order to assess the “pure” fund management performance, they further suggest, “normalizing” the original Sharpe ratio.

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To solve the dilemma of the “negative excess return," because comparing negative Sharpe ratios can be problematic, Israelsen suggests modification of the Sharpe ratio by changing the denominator. He suggests the following: Modified Sharpe Ratio

ER = Excess Return

=ER(Ex ret-T-bill) SD (ER/abs ER)

(3)

(where Excess Return = Asset Return - T Bill Return)

SD = Standard Deviation abs = Absolute value In our study, we have first calculated the regular Sharp ratio, and then the modified ratio for the crisis period. Daily observations were collected for the benchmarks, SRI and nonSRI funds. The major question of the studies on the financial performance of SRI investment funds is whether these funds perform better or worse than the benchmarks and the traditional investment funds whose investment universe is not restricted. SRI investment funds use a set of social, ethical, and environmental criteria to select equities. The financial performance measures used in our study contain these elements as discussed above and will be the most appropriate for these types of funds. The following financial measures are used in our study. The excess return to variability measure (Sharpe, 1966) The excess return to non-diversifiable risk (Treynor, 1965) The differential return with risk measured by beta (Jensen, 1969) Daily returns were calculated according to the following equation Rp=

Ln Pjt + Djt (4) Pjt - 1 Where Rp is the return earned for the fund over week t, Pjt is the price of share on day t, Djt is the dividend paid for the fund in that week, and Pjt - 1is the price from the previous day.

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The Sharpe ratio has been criticized because it focuses on total risk rather than market risk. Therefore, we have also estimated the Treynor ratio. The Treynor ratio is a measurement of the returns earned in excess of that which could have been earned on a riskless investment per each unit of market risk assumed. The Treynor ratio relates excess return over the risk-free rate to the additional risk taken; however, it uses systematic risk instead of total risk. The higher the Treynor ratio, the better the performance. It is a ranking criterion only. Τ =RP – RF (5) β Where RF is the risk free rate, RP is the mean return forth portfolio and β is the beta of the portfolio. The Jensen alpha assesses whether a fund has outperformed or underperformed a market portfolio by testing whether the alpha is significantly different from zero. It is used to determine the excess return of a stock, other security, or portfolio over the security's required rate of return as determined by the Capital Asset Pricing Model (CAPM). This model is used to adjust for the level of beta risk, so that riskier securities are expected to have higher returns. Michel Jensen first used the measure in the evaluation of mutual funds managers in the 1970's. RP – RF =αp + β (RM – RF ) + µP(6) Analysis and Discussion This section analyses the results of calculating different financial performance measures of UK and French SRI funds before and during the crisis period and relates those results to the findings from previous studies of SRI/Ethical funds. Performance of French and UK SRI funds before the crisis period Insert Table 1 Table 1 shows pairs of French funds with the DJ EUROSTOXX index and pairs of UK funds with the FTSE All-Share index, along with their mean daily returns difference, values of t-test, and the significant values of the t-Test for the before-crisis period. The

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results show that there is no statistical difference between the returns of French and UK funds in the before-crisis period at a 95% confidence level. Insert Table 2 Table 2 compares the financial performance measures (Beta, Sharpe ratio, Jensen alpha, Treynor ratio) of French SRI funds with the DJ EUROSTOXX 50 benchmark during the pre-crisis period. Table 2 shows that all French SRI funds have a beta value of less than 1, meaning less risk. In fact, with the exception of two funds, all funds have a value of less than 0.5, and the average beta value of all funds is 0.39. The Sharpe value of 11 SRI funds has a greater value than the Sharpe value of the EUROSTOXX 50 Index i.e. 0.0435, meaning SRI funds perform better. Out of 17 SRI funds, 16 funds have a positive value in the case of the Jensen alpha, but only two SRI funds have significant Alpha value at a 95 % confidence level. The Jensen alpha measure shows that in this case, SRI funds outperform the benchmark but the outperformance is not significant. Fifteen funds have a positive Treynor ratio. Overall, based on these analyses, we can say that French SRI funds outperformed the market before the crisis period. Insert Table 3 Table 3 compares the financial performance measures (Beta, Sharpe ratio, Jensen alpha, Treynor ratio) of UK SRI funds with the FTSE All-Share Index benchmark during the pre-crisis period. Table 3 shows that the Sharpe value of 25 SRI funds has a greater value than the Sharpe value of the FTSE All-Share Index i.e. 0.02303. On the basis of Sharpe value, we can say that more than 92% of SRI funds outperform the market benchmark. Most of the funds have a beta value of less than 0.5. Out of 27 SRI funds, 26 funds have positive value for the Jensen alpha, but only three funds have significant alpha value at a 95 % confidence level. Only 4 funds out of 27 SRI have a negative Treynor ratio. This means that UK funds perform better than the relevant benchmark in the pre-crisis period, but that the outperformance is not significant. Performance of French and UK SRI funds during the crisis period

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Insert Table 4 Table 4 shows the pairs of French funds with the DJ EUROSTOXX index and pairs of UK funds with the FTSE All-Share index, as well as their mean daily returns difference, values of t-test, and the significant values of the t-test for the crisis period. The results show that there is no statistical difference between the returns of French and UK funds during the crisis period at a 95% confidence level. Insert Table 5 Table 5 compares the financial performance measures (Beta, Sharpe ratio, Modified Sharpe ratio, Jensen alpha, Treynor ratio) of French SRI funds with the EUROSTOXX 50 INDEX benchmark during the crisis period. Table 5 shows that the beta value of 13 funds has increased during this period. The average beta for French funds has increased, meaning more risk. However, it still is significantly lower than one. According to the regular Sharp ratio, the benchmark would perform better (because it is smaller negative) than the average Sharp ratio of the SRI funds. The modified Sharp ratio average of the SRI funds shows they are performing better (less negative) than the benchmark index. The modified Sharpe value of 14 SRI funds has greater value than the modified Sharpe value of the EUROSTOXX 50 i.e. -0.1385, meaning that 82% of SRI funds outperform the benchmark markets. All 17 SRI funds have negative value for Jensen alpha but no SRI fund has significant Alpha value at a 95% confidence level. All 17 SRI funds have negative Treynor ratio. French SRI also underperform when compared to the benchmark during the crisis period based on the Treynor ratio. Insert Table 6 Table 6 compares the financial performance measures (Beta, Sharpe ratio, Modified Sharpe ratio, Jensen alpha, Treynor ratio) of UK SRI funds with the FTSE All-Share Index benchmark during the crisis period. Table 6 shows that all UK SRI funds have a beta value of less than 1 and that the beta value of 21 funds declined during this period as well as the average beta of SRI funds. For the UK therefore, some evidence exists

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that SRI funds, which already have less risky portfolios than the market index in normal times, present even less of a risk when compared with the market index during turmoil. The average Sharpe ratio of the SRI funds is less negative than the Sharpe ratio of the benchmark index. In addition, the negative is significantly lower when the average modified Sharpe ratio is calculated and compared to the benchmark ratio. The modified Sharpe value of 21 SRI funds has less value than the modified Sharpe value of the FTSE All-Share Index i.e. -0.1052. This means that 78% of SRI funds perform better than the benchmark market. Out of 27 SRI funds, only 2 of them have positive value for Jensen alpha. No SRI fund has significant alpha value at a 95 % confidence level. All 27 SRI funds have negative Treynor Ratios. So according to that ratio, UK SRI funds underperform in comparison with the benchmarks during the crisis period. However, the underperformance is not significant. This paper has studied the performance of French and UK funds. The results of the performance analysis show that in the pre-crisis period all French and UK funds outperformed the market, but that the performance was not statistically significant. During the crisis period, the modified Sharpe value of both French and UK funds shows results different from the Jensen and Treynor Ratio values. The beta value of UK funds decreased during the crisis period, while the beta value of French funds increased during the same period. Overall, we find that there is no significant difference between the performance of French and UK SRI funds and the relative market benchmarks before and during the crisis period. The results of this study resemble those of Luther and Matatko (1994), who reported ethical fund performance broadly similar to the market benchmarks. The results also correspond to those of the study by Statman (2000), who compared 31 U.S. ethical funds to non-ethical funds and found the same results. Lozano et al. (2006) compared SRI mutual funds to their economic sectors in the Spanish market. They found that SRI mutual funds perform just as well, or even better than the average of the sector to which

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they belong. Schröder (2003) has done research on German, Swiss, and U.S. Funds. Further found that Swiss, German, and U.S. funds do not underperform their benchmarks. However, our results show that while there is no significant difference in financial performance between SRI funds and non-SRI funds, there is some evidence that SRI funds are less risky portfolios than the market index in France and the UK.

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ANNEXURE 1 SRI FUNDS OF FRANCE S.No. SRI FUNDS 1 Ecureuil 1,2,3 ... Futur 2 Ag2r Actions 3 Pf-European Sustainable Equities 4 Actions Planète Durable 5 Dexia Sustainable Emu 6 Dexia SUSTAINABLE EUROPE 7 HSBC Gif Sustainability Leaders 8 HSBC Développement Durable

Fund Company Ecureuilgestion AGICAM Pictet funds Aleyone finance Dexia asset management Dexia asset management HSBC investments (france) HSBC investments (france) BNP Paribas asset 9 BNP Etheis management Groupama asset 10 Euro Capital Durable Retraite management Groupama asset 11 Euro Capital Durable management Sarasin Euro Mid-Caps Expansion Sarasin expertise asset 12 Durable management Societe general asset 13 SGAM Valor Label Actions ISR management SGAM Invest Europe Développement Societe general asset 14 Durable management 15 MAM Actions Ethique Meeschaert 16 AXA Euro ValeursResponsables AXA investment managers 17 EthisVitalité Prado eparnage SRI FUNDS OF UK Fund Name Fund Company 1 AXA Ethical Distribution AXA Investment Managers 2 Prudential Ethical Trust Prudential Unit Trusts 3 AEGON Ethical Equity AEGON Fund Management Aviva Investors UK Fund 4 Aviva Investors UK Growth Services AXA Investment Managers 5 AXA FRAM.HEALTH INC UK Aviva Investors Sustainable Future Aviva Investors UK Fund 6 Global Growth Services Aviva Investors Sustainable Future Aviva Investors UK Fund 7 European Growth Services 8 F&C Stewardship Growth 1 F&C Fund Management 9 F&C Stewardship Income 1 F&C Fund Management Sovereign Unit Trust 10 Sovereign Ethical Inc Managers Marlborough Fund 11 Marlborough Ethical Managers 14

ISIN FR0010091116 FR0000984346 LU0144509717 FR0010429076 BE0174192774 BE0173540072 LU0234595311 FR0000437113 FR0010028969 FR0010086496 FR0010013987 FR0007049093 FR0010422451 FR0000444275 FR0000448987 FR0000982761 FR0007046073 ISIN GB0005297980 GB0006071558 GB0007452484 GB0032493941 GB0007642548 GB0030029952 GB0030029390 GB0030833981 GB0030835697 GB000831761 GB00B0P62G24

12

Ecclesiastical Amity UK

13

Ecclesiastical Amity International

14

Ecclesiastical Amity European

15

Henderson Global Care Growth

16

Henderson Global Care UK Income

17

Henderson Industries of the Future

18

SWIP Global SRI E

19

SWIP Pan-European SRI Equity

20

Skandia IM Ethical

21

Halifax Ethical

22

Marks & Spencer Ethical

23 24 25

Aberdeen Ethical World First State As Pac Sustainability Family Charities Ethical Trust

26

Credit Suisse Fellowship

27

Insight Investment Evergreen

15

Ecclesiastical Investment Management Ecclesiastical Investment Management Ecclesiastical Investment Management Henderson Investment Funds Henderson Investment Funds Henderson Investment Funds Scottish Widows Inv Partnership Scottish Widows Inv Partnership Skandia Investment Management HBOS Investment Fund Managers Marks & Spencer Unit Trust Aberdeen Unit Trust Managers First State Investments Family Investments Crédit Suisse Asset Management Insight Investment Funds Management

GB0009371310 GB0008448663 GB0008446626 GB0005027221 GB0005027338 GB0007731200 GB0030809247 GB0031649923 GB00BOJZPC21 GB0031811622 GB00B1L9ZV86 GB0006833601 GB00B0TY6S22 GB0006685613 GB0004072699 GB0008478108

Table 1-Paired Sample t-test before Crisis S.No

French Fund/ISIN

Difference of Mean St. Dev Daily Return

t-Statitstics (DJ Sig. Value Eurostoxx50)

1

EUROSTOXX50 - FR0010091116

-0.0022

0.9175

-0.0671

0.9465

2

EUROSTOXX50 - FR0000984346

-0.0099

1.0008

-0.2778

0.7812

3

EUROSTOXX50 - LU0144509717

-0.0063

1.0836

-0.1625

0.8710

4

EUROSTOXX50 - FR0010429076

-0.0432

0.4448

-0.9064

0.3673

5

EUROSTOXX50 - BE0174192774

-0.0039

0.7925

-0.1373

0.8909

6

EUROSTOXX50 - BE0173540072

0.0006

0.7924

0.0199

0.9842

7

EUROSTOXX50 - LU0234595311

-0.0050

0.8912

-0.1056

0.9160

8

EUROSTOXX50 - FR0000437113

0.0034

0.7852

0.1199

0.9046

9

EUROSTOXX50 - FR0010028969

0.0040

0.7888

0.1420

0.8871

10

EUROSTOXX50 - FR0010086496

-0.0102

0.7951

-0.3585

0.7201

11

EUROSTOXX50 - FR0010013987

-0.0094

0.7826

-0.3342

0.7383

12

EUROSTOXX50 - FR0007049093

-0.0308

0.9622

-0.8943

0.3714

13

EUROSTOXX50 - FR0010422451

0.0146

0.2805

0.5084

0.6124

14

EUROSTOXX50 - FR0000444275

0.0051

0.7912

0.1814

0.8561

15

EUROSTOXX50 - FR0000448987

0.0165

0.8461

0.5434

0.5870

16 17

EUROSTOXX50 - FR0000982761

-0.0069

0.7923

-0.2448

0.8067

EUROSTOXX50 - FR0007046073

0.0051

1.0418

0.1381

0.8902

S.No

UK Fund/ISIN

Difference of Mean St. Dev Daily Return

t-Statitstics (FTSE ALL Sig. Value SHARE)

1

FTSE - GB0005297980

0.0020

0.5357

0.1069

0.9149

2

FTSE - GB0006071558

0.0043

0.6417

0.1879

0.8510

3

FTSE - GB0007452484

-0.0260

0.5619

-1.2921

0.1967

4

FTSE - GB0032493941

0.0067

0.5410

0.3479

0.7280

5

FTSE - GB0007642548

0.0512

0.9202

1.5539

0.1206

6

FTSE - GB0030029952

0.0051

0.6718

0.2104

0.8334

7

FTSE - GB0030029390

-0.0253

0.6369

-1.1085

0.2680

8

FTSE - GB0030833981

-0.0060

0.5467

-0.3050

0.7605

9

FTSE - GB0030835697

0.0033

0.5851

0.1590

0.8737

10

FTSE - GB0008317611

0.0011

0.9758

0.0323

0.9743

11

FTSE - GB00B0P62G24

0.0101

0.6999

0.2879

0.7736

12

FTSE - GB0009371310

0.0002

0.5484

0.0104

0.9917

13

FTSE - GB0008448663

-0.0122

0.6455

-0.5283

0.5975

14

FTSE - GB0008446626

-0.0072

0.5890

-0.3414

0.7329

15

FTSE - GB0005027221

0.0027

0.7044

0.1072

0.9147

16

FTSE - GB0005027338

0.0011

0.5814

0.0511

0.9593

17

FTSE - GB0007731200

0.0047

0.7010

0.1863

0.8522

18

FTSE - GB0030809247

0.0196

0.8431

0.6511

0.5152

19

FTSE - GB0031649923

-0.0181

1.0451

-0.4834

0.6289

20

FTSE - GB00B0JZPC21

-0.0115

0.8252

-0.2983

0.7656

21

FTSE - GB0031811622

0.0064

0.6505

0.2740

0.7842

22

FTSE - GB00B1L9ZV86

-0.0451

0.9453

-0.4723

0.6377

23

FTSE - GB0006833601

0.0011

0.6708

0.0459

0.9634

24

FTSE - GB00B0TY6S22

-0.0343

0.8258

-0.8256

0.4096

25

FTSE - GB0006685613

-0.0028

0.6472

-0.1227

0.9023

26

FTSE - GB0004072699

0.0010

0.5424

0.0534

0.9574

16

Table 2- Performance of French SRI before crisis S.No.

French Fund/ISIN

1

FR0010091116

Sharpe 0.046

Beta 0.321

Jensen 0.044

Treynor 0.019

(0.099)

2

FR0000984346

0.066

0.185

0.060

0.009

(0.028)

3

LU0144509717

0.050

-0.047

0.070

0.285

(0.004)

4

FR0010429076

0.179

0.776

5

BE0174192774

0.050

0.453

0.067 (0.123) 0.037

0.137 0.031

(0.115)

6

BE0173540072

0.037

0.405

0.036

0.015

(0.115)

7

LU0234595311

0.049

0.391

0.036

0.024

(0.329)

8

FR0000437113

0.037

0.437

0.031

0.018

(0.177)

9

FR0010028969

0.049

0.397

0.033

0.024

(0.142)

10

FR0010086496

0.069

0.433

0.045

0.045

(0.052)

11

FR0010013987

0.070

0.442

0.043

0.046

(0.484)

12

FR0007049093

0.067

0.131

0.084

-0.016

(0.000)

13

FR0010422451

0.039

0.877

-0.008

0.031

(0.779)

14

FR0000444275

0.042

0.433

0.030

0.021

(0.202)

15

FR0000448987

0.026

0.437

0.017

0.009

(0.484)

16

FR0000982761

0.055

0.458

0.040

0.037

(0.092)

17

FR0007046073

0.037

0.126

0.048

-0.043

(0.08)

Average DJ EURO STOXX 50

0.0569 0.0435

The values in parenthesis show p-Value

17

0.3913

0.0420

0.0406

Table 3-Performance of UK SRI before crisis S.No.

Fund name/ISIN

Sharpe

Beta

Jensen

Treynor

1

GB0005297980

0.053

0.7208

0.0134

0.0325

(0.46)

2

GB0006071558

0.051

0.5156

0.0225

0.0220

(0.262)

3

GB0007452484

0.081

0.5606

0.0501

0.0544

(0.004)

4

GB0032493941

0.013

0.5582

0.0175

-0.0134

(0.282)

5

GB0007642548

0.004

0.3640

-0.0161

-0.0370

(0.587)

6

GB0030029952

0.050

0.5527

0.0197

0.0232

- 0.0230

7

GB0030029390

0.080

0.6434

0.0449

0.0572

(0.035)

8

GB0030833981

0.061

0.5225

0.0320

0.0323

(0.001)

9

GB0030835697

0.052

0.3371

0.0333

0.0076

(0.006)

10

GB0008317611

0.054

0.3152

0.0366

0.0066

(0.239)

11

GB00B0P62G24

0.039

0.2252

0.0278

-0.0275

(0.153)

12

GB0009371310

0.055

0.4359

0.0310

0.0208

(0.034)

13

GB0008448663

0.068

0.4731

0.0415

0.0361

(0.035)

14

GB0008446626

0.062

0.5431

0.0322

0.0348

(0.075)

15

GB0005027221

0.053

0.4634

0.0271

0.0204

(0.219)

16

GB0005027338

0.054

0.5578

0.0231

0.0272

(0.197)

17

GB0007731200

0.051

0.4623

0.0250

0.0182

(0.25)

18

GB0030809247

0.036

0.1777

0.0258

-0.0484

(0.268)

19

GB0031649923

0.073

-0.0741

0.0774

0.2749

(0.005)

20

GB00B0JZPC21

0.061

0.4557

0.0383

0.0279

(0.255)

21

GB0031811622

0.049

0.5265

0.0198

0.0205

(0.336)

22

GB00B1L9ZV86

0.074

0.0704

0.0721

-0.1382

(0.254)

23

GB0006833601

0.054

0.4693

0.0283

0.0224

(0.171)

24

GB00B0TY6S22

0.080

0.4686

0.0587

0.0485

(0.107)

25

GB0006685613

0.058

0.4705

0.0322

0.0264

(0.102)

26

GB0004072699

0.054

0.5253

0.0251

0.0257

(0.115)

27

GB0008478108

0.049

0.4869

0.0217

0.0179

(0.298)

AVERAGE FTSE ALL Share Index

0.05443 0.02303

0.43806

The values in parenthesis show p-Value 18

0.03189

0.02197

Table 4-Paired Sample t-test during Crisis French SRI During Crisis S.No

French Fund/ISIN

Difference of Mean Daily Return

St. Dev

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

EUROSTOXX50 - FR0010091116 EUROSTOXX50 - FR0000984346

0.0162 -0.0158

0.9790 1.4499

EUROSTOXX50 - LU0144509717

0.0099

EUROSTOXX50 - FR0010429076

-0.0062

EUROSTOXX50 - BE0174192774

t-Statitstics Sig. Value (DJ Eurostoxx50) 0.3695 -0.2436

0.7119 0.8076

2.9254

0.0759

0.9395

1.5862

-0.0866

0.9310

0.0119

0.8402

0.3165

0.7518

EUROSTOXX50 - BE0173540072

0.0116

0.7563

0.3421

0.7324

EUROSTOXX50 - LU0234595311

0.0196

1.9763

0.2220

0.8244

EUROSTOXX50 - FR0000437113

-0.0079

1.0124

-0.1738

0.8621

EUROSTOXX50 - FR0010028969

-0.0165

1.0988

-0.3357

0.7372

EUROSTOXX50 - FR0010086496 EUROSTOXX50 - FR0010013987

-0.0250 -0.0261

1.1580 1.1197

-0.4829 -0.5205

0.6294 0.6029

EUROSTOXX50 - FR0007049093

-0.0098

1.3851

-0.1577

0.8747

EUROSTOXX50 - FR0010422451 EUROSTOXX50 - FR0000444275

-0.0152 -0.0151

1.3771 1.1722

-0.2458 -0.2872

0.8060 0.7741

EUROSTOXX50 - FR0000448987 EUROSTOXX50 - FR0000982761

-0.0066 -0.0216

1.4111 1.0502

-0.1047 -0.4604

0.9167 0.6454

EUROSTOXX50 - FR0007046073

-0.0134

2.4309

-0.1232

0.9020

t-Statitstics (FTSE ALL SHARE)

Sig. Value

0.4345 0.4921 -0.1532 -0.1972 -0.5722 -0.1965 -0.4999 0.3037 0.4651 0.8930 0.0591 0.1597 -0.7857 -0.3647 -0.4033 0.5053 -0.4404 -0.2424 -0.1265 -0.1479 -0.2977 0.0419 -0.3926 -1.0146 0.3317 -0.0699 -0.2090

0.6641 0.6229 0.8783 0.8437 0.5675 0.8443 0.6174 0.7615 0.6421 0.3723 0.9529 0.8732 0.4324 0.7155 0.6869 0.6136 0.6598 0.8086 0.8994 0.8825 0.7660 0.9666 0.6948 0.3108 0.7402 0.9443 0.8345

UK SRI During Crisis S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

UK Fund/ISIN FTSE - GB0005297980 FTSE - GB0006071558 FTSE - GB0007452484 FTSE - GB0032493941 FTSE - GB0007642548 FTSE - GB0030029952 FTSE - GB0030029390 FTSE - GB0030833981 FTSE - GB0030835697 FTSE - GB0008317611 FTSE - GB00B0P62G24 FTSE - GB0009371310 FTSE - GB0008448663 FTSE - GB0008446626 FTSE - GB0005027221 FTSE - GB0005027338 FTSE - GB0007731200 FTSE - GB0030809247 FTSE - GB0031649923 FTSE - GB00B0JZPC21 FTSE - GB0031811622 FTSE - GB00B1L9ZV86 FTSE - GB0006833601 FTSE - GB00B0TY6S22 FTSE - GB0006685613 FTSE - GB0004072699 FTSE - GB0008478108

Difference of Mean Daily St. Dev Return 0.0298 0.0374 -0.0109 -0.0141 -0.0561 -0.0167 -0.0365 0.0218 0.0324 0.0668 0.0042 0.0114 -0.0604 -0.0270 -0.0349 0.0375 -0.0376 -0.0236 -0.0133 -0.0114 -0.0262 0.0052 -0.0318 -0.0856 0.0259 -0.0050 -0.0189

19

1.5320 1.6976 1.5951 1.5996 2.1900 1.8932 1.6305 1.6063 1.5542 1.6716 1.5897 1.5954 1.7163 1.6552 1.9331 1.6593 1.9084 2.1752 2.3414 1.7141 1.9642 2.7482 1.8077 1.8855 1.7454 1.5979 2.0158

Table 5-Performance of French SRI during crisis French Fund/ISIN 1

Sharpe

Modified Sharpe -0.058 -0.159

FR0010091116

Beta 0.903

Jensen -0.028

Treynor -0.164

(0.517)

2

-0.037

FR0000984346

-0.102

0.756

-0.014

-0.109

(0.823)

3

-0.053

LU0144509717

-0.131

-0.061

-0.138

0.056

(0.1050

4

-0.054

FR0010429076

-0.121

0.567

-0.046

-0.134

(0.431)

5

-0.058

BE0174192774

-0.164

0.945

-0.018

-0.168

(0.62)

6

-0.059

BE0173540072

-0.161

0.921

-0.021

-0.166

(0.523)

7

-0.064

LU0234595311

-0.127

0.354

-0.097

-0.153

(0.131)

8

-0.039

FR0000437113

-0.105

0.854

-0.010

-0.110

(0.823)

9

-0.050

FR0010028969

-0.126

0.765

-0.012

-0.133

(0.789)

10

-0.049

FR0010086496

-0.111

0.694

-0.012

-0.121

(0.784)

11

FR0010013987

-0.048

-0.110

0.72

12

FR0007049093

-0.075

-0.120

0.48

13

FR0010422451

-0.052

-0.118

0.65

14

FR0000444275

-0.051

-0.120

0.72

15

FR0000448987

-0.049

-0.116

0.64

16

FR0000982761

-0.051

-0.117

0.74

17

FR0007046073

-0.047

-0.115

0.26

-0.008 (0.847) -0.052 (0.176) -0.027 (0.614) -0.018 (0.689) -0.036 (0.495) -0.010 (0.799) -0.075

-0.120 -0.139 -0.129 -0.129 -0.127 -0.126 -0.150

(0.368)

Average DJ EURO STOXX 50

-0.053 -0.0500

* The values in parenthesis show p-Value

20

-0.125 -0.1385

0.642

-0.037

-0.125

Table 6-Performance of UK SRI during crisis S.No. 1

UK Fund/ISIN

Sharpe

Modified Sharpe

Beta

GB0005297980

-0.034

-0.080

0.666

Jensen

Treynor

-0.057

-0.097

(0.358)

2

GB0006071558

-0.123

-0.050

0.621

-0.069

-0.141

(0.318)

3

GB0007452484

-0.113

-0.070

0.397

-0.039

-0.146

(0.428)

4

GB0032493941

-0.070

-0.033

0.496

-0.027

-0.095

(0.63)

5

GB0007642548

-0.027

-0.013

0.171

-0.012

-0.110

(0.856)

6

GB0030029952

-0.087

-0.044

0.342

-0.038

-0.126

(0.55)

7

GB0030029390

-0.065

-0.035

0.441

-0.009

-0.095

(0.862)

8

GB0030833981

-0.099

-0.049

0.495

-0.063

-0.124

(0.268)

9

GB0030835697

-0.119

-0.075

0.399

-0.082

-0.152

(0.077)

10

GB0008317611

-0.129

-0.067

0.464

-0.111

-0.156

(0.06)

11

GB00B0P62G24

-0.096

-0.057

0.403

-0.053

-0.129

(0.277)

12

GB0009371310

-0.091

-0.052

0.421

-0.059

-0.122

(0.246)

13

GB0008448663

-0.023

-0.018

0.270

0.000

-0.075

(0.995)

14

GB0008446626

-0.060

-0.032

0.414

-0.021

-0.092

(0.695)

15

GB0005027221

-0.062

-0.029

0.340

-0.019

-0.101

(0.765)

16

GB0005027338

-0.113

-0.049

0.568

-0.073

-0.134

(0.256)

17

GB0007731200

-0.063

-0.030

0.341

-0.017

-0.101

(0.794)

18

GB0030809247

-0.085

-0.036

0.294

-0.034

-0.130

(0.65)

19

GB0031649923

-0.097

-0.043

0.179

-0.054

-0.175

(0.481)

20

GB00B0JZPC21

-0.080

-0.046

0.372

-0.040

-0.116

(0.458)

21

GB0031811622

-0.066

-0.031

0.349

-0.027

-0.104

(0.686)

22

GB00B1L9ZV86

-0.093

-0.042

-0.071

-0.093

0.122

(0.249)

23

GB0006833601

-0.078

-0.034

0.438

-0.015

-0.106

(0.823)

24

GB00B0TY6S22

0.002

0.002

0.335

0.031

-0.038

(0.617)

25

GB0006685613

-0.129

-0.067

0.417

-0.074

-0.160

(0.216)

26

GB0004072699

-0.0420

-0.0847

0.4964

-0.0364

-0.1100

(0.521)

27

GB0008478108

-0.080

-0.035

0.376

-0.032

-0.115

(0.654)

AVERAGE FTSE ALL SHARE

-0.041 -0.0425

-0.082 -0.1052

* The values in parenthesis show p-Value 21

0.386

-0.042

-0.108

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