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(December-2003) SRI fund not just a fuzzy face
Socially responsible investment (SRI) managers are returning more than just warm, fuzzy feelings, according to a study conducted by AMP Henderson Global Investors.
The study says, despite its poor reputation in the market, the median SRI manager has actually outperformed the broader S&P/ASX 200 Index over one, two, three and five years to September 30, 2003.
And while the record is far from unblemished — the median SRI manager underperfomed the ASX 200 in 2002 — AMP Henderson believes long-term competitive results from the sector can be expected.
In 2002, during a market fall of 8.78 per cent (ASX 200), the SRI median returned minus 10.38 per cent. In the 12 months to September 30, 2003, however, the SRI median returned 2.3 per cent above the index, while the median and the ASX 200 index also returned 13.7 per cent and 11.4 per cent respectively during the period.
AMP attributes this year’s good performance to a “typical style” employed by SRI funds, and possible links between company, social and environmental performance.
The study shows that SRI techniques tend to favour portfolios with growth and small-cap biases, factors which would have assisted good returns over the past year.
The study also highlighted the fact that some stocks generally not found in SRI portfolios struggled during 2003, for example, gambling company Aristocrat and wine maker Southcorp.
Interestingly, the warm and fuzzy feelings sometimes associated with SRIs may be paying off, with the study suggesting companies with better social and environmental standards produce superior financial results.
“SRI portfolios with a bias towards companies with higher social and environmental standards are well positioned to deliver long-term competitive returns,” the study says.
Studies are emerging which examine the effects of good management, customer loyalty, low legal risk and high employee retention rates (often associated with SRI managers), on financial results.
AUTHOR
Lucie Beaman
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