Do Disclosures Drive Socially Responsible Investing?

Abstract

With a growing number of nations pursuing the Sustainable Development Goals and increasing their disclosure and reporting norms, Socially Responsible Investing (SRI) is an evolving strategy in developing countries whilst holding mainstream grounds in developed countries. The study examined the performance of SRI indices against their conventional and benchmark counterparts across select developing and developed countries during boom and recessionary periods over 14 years. Notably, the responsible indices in emerging countries are non-penalizing using the mean-variance and risk-adjusted return analysis. Similarly, SRI earned a premium in emerging countries to secure topmost ranks, using Fama’s decomposition model. The performance of SRI was significantly different in India, and abnormal returns were observed for select developing countries during the recessionary phase. Thus, SRI provides a safe haven to investors during adverse times and provides diversification benefits to responsible investors.