24. Money-Flows of Socially Responsible Investment Funds around the World

  1. H. Kent Baker and
  2. John R. Nofsinger
  1. Luc Renneboog1,
  2. Jenke Ter Horst2 and
  3. Chendi Zhang3

Published Online: 12 SEP 2012

DOI: 10.1002/9781118524015.ch24

Socially Responsible Finance and Investing: Financial Institutions, Corporations, Investors, and Activists

Socially Responsible Finance and Investing: Financial Institutions, Corporations, Investors, and Activists

How to Cite

Renneboog, L., Ter Horst, J. and Zhang, C. (2012) Money-Flows of Socially Responsible Investment Funds around the World, in Socially Responsible Finance and Investing: Financial Institutions, Corporations, Investors, and Activists (eds H. K. Baker and J. R. Nofsinger), John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118524015.ch24

Author Information

  1. 1

    Professor of Corporate Finance, Tilburg University

  2. 2

    Professor of Portfolio Management, Tilburg University

  3. 3

    Associate Professor of Finance, University of Warwick

Publication History

  1. Published Online: 12 SEP 2012
  2. Published Print: 28 AUG 2012

ISBN Information

Print ISBN: 9781118100097

Online ISBN: 9781118524015

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Keywords:

  • mutual funds;
  • ethical funds;
  • investor clienteles;
  • investment screens.

Summary

This chapter studies the money flows into and out of socially responsible investment (SRI) funds around the world. In their investment decisions, investors in SRI funds may be more concerned with ethical or social issues than with fund performance. Therefore, SRI money flows are less related to past fund returns. Ethical money is less sensitive to past negative returns than are conventional fund flows, especially when SRI funds primarily use negative or sin/ethical screens. Social attributes of SRI funds weaken the relationship between money inflows and past positive returns. However, money flows into funds with environmental screens are more sensitive to past positive returns than are conventional fund flows. Stock picking based on in-house SRI research increases the money flows. These results give evidence on the role of nonfinancial attributes, which induce heterogeneity of investor clienteles within SRI funds. No evidence of a smart money effect is found, as the funds that receive more inflows neither outperform nor underperform their benchmarks or conventional funds.