165 research outputs found
Item Response Models to measure Corporate Social Responsibility
Corporate Social Responsibility (CSR) is a multidimensional con-
cept that involves several aspects, ranging from Environment, to Social
and Governance. Companies aiming to comply with CSR standards
have to face challenges that vary from one aspect to the other and
from one industry to the other. Latent variable models may be use-
fully employed to provide a unidimensional measure of the grade of
compliance of a firm with CSR standards that is both understand-
able and theoretically solid. A methodology based on Item Response
Theory has been implemented on the multidimensional sustainability
rating as expressed by KLD dataset from 1991 to 2007. Results sug-
gest that companies in the industry Oil & Gas together with firms
in Industrials, Basic Materials and Telecommunications have a higher
difficulty to meet the CSR standards. Criteria based on Human rights,
Environment, Community and Product quality have a large capacity
to select the best performing firms, as they are very discriminant, while
Governance does not exhibit similar behavior. A stock selection based
on the ranking of the firms according to the proposed CSR measure
supports the hypothesis of a positive relationship between CSR and
financial performanc
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On the price of morals in markets: an empirical study of the Swedish AP-Funds and the Norwegian Government Pension Fund
This study empirically analyses the exclusion of companies from investors’ investment universe due to a
company’s business model (sector-based exclusion) or due
to a company’s violations of international norms (normbased exclusion). We conduct a time-series analysis of the performance implications of the exclusion decisions of two leading Nordic investors, Norway’s Government Pension Fund-Global (GPFG) and Sweden’s AP-funds. We find that their portfolios of excluded companies do not generate an abnormal return relative to the funds’ benchmark index. While the exclusion portfolios show higher risk than the respective benchmark, this difference is only statistically
significant for the case of GPFG. These findings suggest
that the exclusion of the companies generally does not
harm funds’ performance. We interpret these findings as
indicative that with exclusionary screening, as practiced by the sample funds, asset owners can meet the ethical
objectives of their beneficiaries without compromising
financial returns
Principle Guided Investing: The Use of Negative Screens and its Implications for Green Investors
In recent years Socially Responsible Investment (SRI) has received considerable attention from both private investors as well as pension funds. Despite this proliferation in interest, several topics are still unresolved, namely selection methods, performance and effects regarding sustainability. This paper examines how green investors can induce firms to invest in cleaner production technology by using exclusionary investment screens. SRI is more likely to be successful when abatement costs are low and if principle guided investors are numerous and have homogenous investment principles. The transformation process becomes more probable when shares of clean firms are viewed as a separate asset class by all investors. Green investors have to accept lower returns from shares of clean firms, even in the case of positive externalities
Corporate Responses to Climate Change and Financial Performance: The Impact of Climate Policy
This paper examines the relationship between corporate activities to address climate change and stock performance. By separately analyzing the US and European stock markets for different sub-periods, we highlight the impact of the underlying climate policy regime. Methodologically, we compare risk-adjusted returns of stock portfolios comprising corporations that differ in their responses to climate change. In this respect, we apply the flexible Carhart fourfactor model besides the restricted one-factor model based on the Capital Asset Pricing Model (CAPM). While our portfolio analysis shows negative relationships over the entire observation period from 2001 to 2006, we find that a trading strategy, which bought stocks of corporations with a higher level of responses to climate change and sold stocks of corporations with a lower level, led to negative abnormal returns in regions and periods with less ambitious climate policy, but to positive abnormal returns in regions and periods with stringent climate policy
Principle Guided Investing: The Use of Exclusionary Screens and Its Implications for Green Investors
This paper examines how "green" investors can induce firms to invest in clean production technology. The 1-period model incorporates heterogeneous agents - Markowitz investors and green investors – and two groups of firms working either with clean or polluting technology. Since green investors apply exclusionary environmental screens, some firms will invest in abatement technology in order to switch to a clean technology and thereby raising firm value. The number of firms working with clean technology will be larger, the higher the proportion of green investors, the lower costs of abatement technology, the higher diversification benefits of stocks of clean firms and if positive spill-overs for clean firms exist
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