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| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | Socially Responsible Investments: A Performance Analysis during the Financial Market Crisis of 2008 |
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| Institution | University of Zurich |
| Faculty | Faculty of Economics, Business Administration and Information Technology |
| Date | 2010 |
| Zusammenfassung | Socially responsible investments (SRI) are a steadily growing part of the financial industry. At the end of 2007, the European SRI market represented about 17.6% of the funds of the total asset management industry in Europe. The financial market crisis (which started with the subprime crisis in 2007) strengthened the belief among investors to take responsibility for their investments. In late 2009, Bloomberg, a major financial information provider, started publishing environmental, social and governance (ESG) data. This raises the question, whether an investor can obtain a positive abnormal return by incorporating this data into his decision making. This study aims to answer this question by applying the publicly available ESG indicators to rate the constituents of Bloomberg’s ” ESG Processed Index“ in a Best-in-Class approach. The ESG ratings are then used to form one portfolio of ESG leaders and one portfolio of ESG laggards. The financial performance of the two portfolios is compared by implementing a simple trading strategy in which the high- rated portfolio is bought and the low-rated portfolio is sold (long–short strategy). The examined period ranges from 2006–2009 and is thereby heavily affected by the financial market crisis. In contrast to previous studies which investigated the relationship between sustain- ability and financial performance on the basis of socially responsible mutual funds, this study focuses only on socially screened portfolios. Hence, the results do neither depend on the market timing nor on the fund manager’s influence and can fully be referred to the ESG factors. During the analysis, different screenings are applied to investigate the relationship between ESG factors and financial performance. Some portfolios are thereby screened with the RepRisk Index which in addition accounts for the companies’ reputational risks. The study reveals that investors can obtain a positive abnormal return following a long–short strategy. According to the results, it is advisable to concentrate on stocks with extreme ratings to maximize the alpha. Furthermore, the study discloses that the results are sensitive to the applied weightings. Due to a short period under consideration, only few results are significant. In addition, the examined period is heavily affected by the financial market crisis, which was affected by many factors and could have skewed the results of the present study. |
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