Looking at socially responsible investment strategies through the lenses of the global ETF industry

Franco Fiordelisi, Giuseppe Galloppo, Gabriele Lattanzio and Viktoriia Paimanova

Journal of International Money and Finance, 2023, vol. 137, issue C

Abstract: Environmental, Social, and Governance (ESG) ratings feature statistical and economic problems undermining their reliability as valid proxies for corporates’ social performance. To overcome this ratings providers specific bias, we focus on global sample of ESG-oriented Exchange Traded Funds (ETFs). Studying passive and pre-committed strategies provide us with several economic and econometric advantages, allowing us to document that Socially Responsible Investments (SRI)-oriented strategies generate significantly higher average stock market returns and liquidity. However, the identified overperformance is concentrated in months of extreme climate activity, while the effect reverses during financial crises. These findings confirm that investors react to non-pecuniary shocks by increasing the weights assigned to SRI investments in their portfolio, but their preference shifts back towards traditional strategies during economic downturns.

Keywords: Sustainable Investments; Climate Change; Natural Disasters; ETF (search for similar items in EconPapers)
JEL-codes: G11 G12 G18 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:137:y:2023:i:c:s0261560623001183

DOI: 10.1016/j.jimonfin.2023.102917

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