Investing in Sustainable Development as a Form of Alternative Investments in Financial Markets – Analysis of the Volatility of Rates of Return of Open-End SRI Funds in Poland

Dominika Krawczyńska

Abstract


Theoretical background: Socially responsible investing (SRI) is a specific type of investment, combining both financial objectives and investor preferences regarding the environment, society, or corporate governance. Since the period following the 2007 global financial crisis, a significant increase in interest in assets that meet SRI policies has been observed, which translated into a shift in the mutual fund products offered. SRI investment funds play a significant role in the SRI market due to the size of assets under management. They also have an indirect impact on the interest of individual investors in the theory of responsible investment by adjusting their offerings adequately.

Purpose of the article: The aim of the study is to determine to what extent the performance of open-ended socially responsible investment funds reflects changes in asset prices on the capital market in Poland.

Research methods: The analysis was carried out for the period from 1 January 2020 to 1 January 2022. Daily quotes for SRI funds were used, while only funds that operated continuously during the set period were selected. The WIG and WIGESG indexes were used as stock market benchmarks. Due to the fact that mutual funds are quoted once a day, a simple daily rate of return was used in the study. Using the linear correlation coefficient, a correlation matrix was constructed between the daily returns of the funds and the adopted benchmarks. The study was conducted with the use of the linear regression method to verify the impact of capital market price changes on the returns achieved by SRI mutual funds. Then, using the method of least squares, the model parameters were estimated for SRI funds.

Main findings: The results confirmed the influence of market benchmarks on the development of SRI fund returns in Poland. In addition, the results confirmed that the conventional benchmark (WIG) has a greater impact on fund returns than the ESG benchmark (WIGESG).


Keywords


socially responsible investments; SRI funds; mutual funds; performance evaluation of SRI funds

Full Text:

PDF

References


Global Sustainable Investment Review.

Albuquerque, R., Koskinen, Y., Yang, S., & Zhang, C. (2020). Resiliency of environmental and social stocks: An analysis of the exogenous COVID-19 market crash. The Review of Corporate Finance Studies, 9(3), 593–621. doi:10.1093/rcfs/cfaa011

Barrachini, C. (2004). An ethical investment evaluation for portfolio selection. Electronic Journal of Business Ethics and Organization Studies, 9(1).

Bauer, R., Koedijk, K., & Otten, R. (2005). International evidence on ethical mutual fund performance and investment style. Journal of Banking & Finance, 29(7), 1751–1767.

Bauer, R., Otten, R., & Rad, A.T. (2006). Ethical investing in Australia: Is there a financial penalty? Pacific-Basin Finance Journal, 14(1), 33–48. doi:10.1016/j.pacfin.2004.12.004

Broadstock, D.C., Chan, K., Cheng, L.T., & Wang, X. (2021). The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China. Finance Research Letters, 38, 101716. doi:10.1016/j.frl.2020.101716

Cortez, M.C., Silva, F., & Areal, N. (2009). The performance of European socially responsible funds. Journal of Business Ethics, 87(4), 573–588. doi:10.1007/s10551-008-9959-x

Derwall, J., Guenster, N., Bauer, R., & Koedijk, K. (2005). The eco-efficiency premium puzzle. Financial Analysts Journal, 61(2), 51–63. doi:10.2469/faj.v61.n2.2716

Doś, A., & Foltyn-Zarychta, M. (2017). Socially responsible investment market size in Poland: The content analysis. In D. Procházka (Ed.), New Trends in Finance and Accounting (pp. 653–663). Cham: Springer. doi:10.1007/978-3-319-49559-0_60

Folger-Laronde, Z., Pashang, S., Feor, L., & ElAlfy, A. (2022). ESG ratings and financial performance of exchange-traded funds during the COVID-19 pandemic. Journal of Sustainable Finance & Investment, 12(2), 490–496. doi:10.1080/20430795.2020.1782814

Geczy, C.C., Stambaugh, R.F., & Levin, D. (2005). Investing in socially responsible mutual funds. SSRN Electronic Journal. doi:10.2139/ssrn.416380

Gupta, P., Mehlawat, M.K., & Saxena, A. (2013). Hybrid optimization models of portfolio selection involving financial and ethical considerations. Knowledge-Based Systems, 37, 318–337. doi:10.1016/j.knosys.2012.08.014

Hartzmark, S.M., & Sussman, A.B. (2019). Do investors value sustainability? A natural experiment examining ranking and fund flows. The Journal of Finance, 74(6), 2789–2837. doi:10.1111/jofi.12841

Humphrey, J.E., & Lee, D.D. (2011). Australian socially responsible funds: Performance, risk and screening intensity. Journal of Business Ethics, 102(4), 519–535. doi:10.1007/s10551-011-0836-7

Ito, Y., Managi, S., & Matsuda, A. (2013). Performances of socially responsible investment and environmentally friendly funds. The Journal of the Operational Research Society, 64(11), 1583–1594. doi:10.1057/jors.2012.112

Jamróz, P., & Żebrowska-Suchodolska, D. (2021). Impact of the COVID-19 pandemic on the results of Polish socially responsible funds. Optimum. Economic Studies, 4(106), 70–82. doi:10.15290/OES.2021.04.106.06

Karkowska, R., & Niewińska, K. (2013). Analiza zmienności stóp zwrotu funduszy inwestycyjnych w Polsce. Zarządzanie i Finanse, 1(1), 255–267.

Kubiczek, J., & Tuszkiewicz, M. (2022). Intraday patterns of liquidity on the Warsaw Stock Exchange before and after the outbreak of the COVID-19 pandemic. International Journal of Financial Studies, 10(1), 13. doi:10.3390/ijfs10010013

Kondrakiewicz, T. (2010). Giełdy papierów wartościowych w warunkach globalizacji rynków finansowych. Annales Universitatis Mariae Curie-Skłodowska. Sectio H –Oeconomia, 44(2), 485–498.

Leite, P., & Cortez, M.C. (2015). Performance of European socially responsible funds during market crises: Evidence from France. International Review of Financial Analysis, 40, 132–141. doi:10.1016/j.irfa.2015.05.012

Lulewicz-Sas, A., & Kilon, J. (2014). Analysis of the effectiveness of socially responsible investing funds in Poland. Economics and Management, 19(4), 338–345. doi:10.5755/j01.em.19.4.8101

Markowitz, H. (1952). Portfolio Selection. Journal of Finance, 7(1), 77–91. doi:10.2307/2975974

Mirza, N., Hasnaoui, J.A., Naqvi, B., & Rizvi, S.K.A. (2020). The impact of human capital efficiency on Latin American mutual funds during Covid-19 outbreak. Swiss Journal of Economics and Statistics, 156(1), 1–7. doi.10.1186/s41937-020-00066-6

Nofsinger, J., & Varma, A. (2014). Socially responsible funds and market crises.Journal of Banking &Finance, 48, 180–193. doi:10.1016/j.jbankfin.2013.12.016

Pisani, F., & Russo, G. (2021). Sustainable finance and COVID-19: The reaction of ESG funds to the 2020 Crisis. Sustainability, 13(23), 13253. doi:10.3390/su132313253

Eurosif Report 2016. European SRI Study.

Eurosif Report 2018. European SRI Study.

Ter Horst, J.R., Zhang, C., & Renneboog, L. (2007). Socially responsible investments: Methodology, risk exposure and performance. SSRN Electronic Journal. doi:10.2139/ssrn.985267

Tippet, J. (2001). Performance of Australia’s ethical funds. Australian Economic Review, 34, 170–178. doi:10.1111/1467-8462.00186

Tomaszewski, J. (2016). Fundusze inwestycji odpowiedzialnych społecznie w Europie – struktura i trendy rozwojowe. Zarządzanie Finansami i Rachunkowość, 4(2), 17–26.

Utz, S., Wimmer, M., Hirschberger, M., & Steuer, R.E. (2014). Tri-criterion inverse portfolio optimization with application to socially responsible mutual funds. European Journal of Operational Research, 234(2), 491–498. doi:10.1016/j.ejor.2013.07.024

von Wallis M., & Klein C. (2015).Ethical requirement and financial interest: a literature review on socially responsible investing. Business Research, 8(1), 61–98. doi:10.1007/s40685-014-0015-7

Wolska, M., & Czerwonka, M. (2013). Społecznie odpowiedzialne inwestowanie – analiza rentowności funduszy SRI w Polsce. Studia i Prace Kolegium Zarządzania i Finansów, Zeszyt Naukowy, 126, 9–22.

www1: https://www.analizy.pl/fundusze-inwestycyjne-otwarte/notowania?&jednPodst=1&isEsgPolicy=1&page=1&sortDir=asc&sortCol=nazwafundOpenMetrics

www2: www.stooq.pl

www3: https://www.gpw.pl/




DOI: http://dx.doi.org/10.17951/h.2023.57.2.51-65
Date of publication: 2023-06-27 19:34:40
Date of submission: 2022-08-01 16:02:05


Statistics


Total abstract view - 289
Downloads (from 2020-06-17) - PDF - 0

Indicators



Refbacks

  • There are currently no refbacks.


Copyright (c) 2023 Dominika Krawczyńska

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.