24. Money-Flows of Socially Responsible Investment Funds around the World
- H. Kent Baker and
- John R. Nofsinger
Published Online: 12 SEP 2012
Copyright © 2012 John Wiley & Sons. All rights reserved.
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
- Published Online: 12 SEP 2012
- Published Print: 28 AUG 2012
Print ISBN: 9781118100097
Online ISBN: 9781118524015
- mutual funds;
- ethical funds;
- investor clienteles;
- investment screens.
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.