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The Performance of Socially Responsible Funds: Does the Screening Process Matter?


  • The authors thank John Doukas (the editor), two anonymous referees, Agnès Bénassy-Quéré, Dominique Blanc, Patricia Crifo, Olena Havrylchyk, Samer Hobeika, Jacquelyn Humphrey, Isabelle Laudier, Jean-Pierre Sicard, Stéphane Voisin, as well as participants of the CSR seminar at the Ecole Polytechnique (Business Economics Chair, Paris, 2010), the Finance and Corporate Governance Conference (Melbourne, 2011), the Economics of Corporate Social Responsibility Conference (Paris, 2011) and the PRI-Mistra Academic Conference (Sigtuna, 2011) for helpful comments. We thank also Barbara Balvet, Kamel Laaradh, Beth Morgan and Nicholas Sowels for research assistance. Financial support from the Institut CDC pour la Recherche is gratefully acknowledged. Correspondence: Gunther Capelle-Blancard.


In this study, we examine whether the financial performances of socially responsible investment (SRI) mutual funds are related to the features of the screening process. Based on a sample of French SRI funds, we find evidence that a greater screening intensity slightly reduces financial performance (but the relationship runs in the opposite direction when screening gets tougher). Further, we show that only sectoral screens – such as avoiding ‘sin’ stocks – decrease financial performance, while transversal screens – commitment to UN Global Compact Principles, ILO/Rights at Work, etc. – have no impact. Lastly, when the quality of the SRI selection process is proxied by the rating provided by Novethic, its impact is not significant, while a higher strategy distinctiveness amongst SRI funds, which also gives information on the quality of the selection process, is associated with better financial performance.