Socially Responsible Investment. ECG Factors

Akademische Arbeit aus dem Jahr 2017 im Fachbereich BWL - Bank Brse Versicherung Note: 1.0 Henley Business School University of Reading Veranstaltung: Topics in Finance Sprache: Deutsch Abstract: Investors talk about increasing profits minimising transaction costs or how to evade taxes most effectively but very few investors consider if the company contributes something to society treats employees with respect or tries to reduce harm to environment; in fact - they do not invest socially responsible. But what is socially responsible and how can firms be obtained which make the grade? This essay provides a short overview about the history of Socially Responsible Investing (SRI) and its terminology. Furthermore different investment strategies are explained in order to understand the depth and the variety of possibilities using these strategies. Knowing these facts the main reason for investors to invest lies within the nature of things: the return. Every good intention will be flood by the opposite if the good intention does not perform well and the sinner stocks achieve excess returns. The overall opinion about SRI and the most common theory is that the SRI approach is underperforming the market as the investor is restricted in stock selection which decreases the possible level of diversification eventually leading to a lower risk-return level. But do SRI portfolios underperform the market respectively the Sin Stocks? Moreover this paper tries to use statistical approaches to approve or disapprove the abovementioned theory. By regressing the returns of the biggest social index the KLD 400 against the returns of the S&P500 and the biggest Sin Stocks Fund called VICEX an informed choice will be possible. Furthermore the investment approaches will be analysed in the overall context of their long-term performance and possible explanations for under- and overperformance. In addition this essays appendix provides an approach of investing f