Sanchez, Jose L. Fernandez, and Ladislao Luna Sotorrio. "Evaluation of the Financial Performance of European SRI Funds Using Structural Equation Models." Working Paper, University of Cantabria, 2009.

Author's abstract:

The aim of this study is to evaluate the performance of a sample of European equity funds and to examine whether there is any relationship between, on one hand, the financial performance of investment in socially responsible firms (social factor of the investment), the type of investment policy (negative and positive screening), and the quality of information used by fund managers in their investment decisions and, on the other, the financial performance of socially responsible investment (SRI) funds. Two kinds of analysis are proposed to compare the results: one classical commonly used in empirical research into the subject based on the bivariate testing of difference in means (Mann-Whitney test), and another, more innovative approach, based on the multivariate technique of structural equation models (SEM). The main conclusion of this study is that the application of social criteria in investment decisions carries a cost to the investor in terms of lower
return.