There is no evidence that SRI investment funds—standing alone—improves portfolio companies performance on environmental or social metrics, probably because such funds prefer investing in firms that already score high on those metrics. Davidson Heath et al., Does Socially Responsible Investing Change Firm Behavior? (ECGI Finance Working Paper No. 762 2021), https://ssrn.com/abstract=3837706.
A study of US-based ESG mutual funds from 2010 to 2018 relative to non-ESG funds offered by the same fund family counter-intuitively found that the former’s portfolio companies had worse records for environmental and social compliance. The same study further found that ESG funds portfolio companies had higher carbon emissions per unit of revenue than their non-ESG siblings, Finally, the study found that ESG funds charged higher fees and underperformed—on a risk-adjusted basis—their non-ESG siblings. Aneesh aghunandan, & Shivaram Rajgopal, Do ESG Funds Make Stakeholder-Friendly Investments? (May 3, 2021), https://ssrn.com/abstract=3826357.
