GLOBAL - Funds touting socially responsible investment strategies have not proven to outperform more traditional funds and did not safeguard assets during the financial crisis, research from EDHEC-Risk Institute shows.
EDHEC's report, released today, paralleled findings from its earlier study in 2008 showing the funds did not produce significant alpha.
"In most cases alpha is negative and not statistically significant," wrote Nöel Amenc, director at EDHEC and Véronique le Sourd, senior research engineer.
"In addition, the focus on the financial crisis reveals that SRI funds provided no protection from market downturns during this period, as illustrated by the considerable increase of extreme risks borne by these funds," Amenc and le Sourd wrote.
Officials at EDHEC instead recommend using a global SRI process that incorporates SRI stock picking with traditional asset management techniques like diversification, forecasting market values and tactical asset allocation.
SRI criteria could be important, but it's not enough to create outperformance, said Amenc in an interview with Global Pensions.
Investors can't "invest in SRI but forfeit 50 years of investment research," said Amenc.
He said when quantitative investment practices are combined with SRI "the results are seriously better".
EDHEC tracked the performance of 69 best-in-class SRI funds and green funds which focus on environmental factors from 2002 to the end of 2009.
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