The urge to act: a comparison of active and passive socially responsible investment funds in the United States

Xing Chen, Bert Scholtens*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)
4 Downloads (Pure)

Abstract

Innovative finance vehicles are required to facilitate the transition towards a sustainable society. Here, we investigate two very successful innovations in the fund industry, namely, the index mutual funds and the passively managed exchange traded funds (ETFs). We study socially responsible investment funds in the US and particularly focus on their financial performance, cost of investing, and degree of active management. We do not find persuasive evidence that the actively managed funds perform better than their passively managed counterparts do. Furthermore, we find that some active SRI funds seem to operate as ‘closet indexers’ with a low degree of active management. We conclude that passively managed socially responsible funds have the potential to enrich the spectrum of financial products that may help advance the sustainability transition.
Original languageEnglish
Pages (from-to)1154-1173
Number of pages20
JournalCorporate Social Responsibility and Environmental Management
Volume25
Issue number6
Early online date13 Jun 2018
DOIs
Publication statusPublished - 15 Nov 2018

Keywords

  • Active versus passive fund performance
  • ETF
  • Funds
  • Socially responsible investing
  • United States

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