On the Price of Morals in Markets: An Empirical Study of the Swedish AP-Funds and the Norwegian Government Pension Fund

Andreas G. F. Hoepner () and Lisa Schopohl ()
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Andreas G. F. Hoepner: University of Reading
Lisa Schopohl: University of Reading

Journal of Business Ethics, 2018, vol. 151, issue 3, No 5, 665-692

Abstract: Abstract 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 (norm-based 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.

Keywords: ESG; GPFG; AP-funds; Exclusions; Exclusionary screening; Divestment; Negative screening; Norm-based exclusions; Sector-based exclusions; SRI (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (18)

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DOI: 10.1007/s10551-016-3261-0

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