Style and performance of international socially responsible funds in Europe

paper analyses the performance and investment styles ofinternationally oriented Socially Responsible Investment (SRI) funds, domiciled in eight European markets, in comparison withcharacteristicsmatched conventional funds. To the best of ourknowledge, this is the first multi-country study, focused on international SRI funds (investing in Global and in European equities), tocombine the matched-pairs approach with the use of robust conditional multi-factor performance evaluation models, which allowfor both time-varying alphas and betas and also control for homebiases and spurious regression biases. In general, the results show that differences in the performance ofinternational SRI funds and their conventional peers are not statistically significant. Regarding investment styles, SRI and conventionalfunds exhibit similar factor exposures in most cases. In addition, conventional benchmarks present a higher explaining power of SRIfund returns than SRI benchmarks. Our results also show significant differences in the investment styles of SRI funds according towhether they use "best-in-class" screening strategies or not. Whencompared to SRI funds that employ simple negative and/or positive screens, SRI "best-in-class" funds present significantly lowerexposures to small caps and momentum strategies and significantlyhigher exposures to local stocks. (C) 2013 Elsevier B. V. All rights reserved.