DOES A SOCIALLY RESPONSIBLE PORTFOLIO OUTPERFORM A CONVENTIONAL PORTFOLIO? (THE CASE OF THE JANTZI SOCIAL INDEX)

Abstract

Socially responsible investment (SRI) takes financial return as well as environmental, social, and governance issues into consideration. Although SRI is becoming popular, a controversy exists among investors regarding its performance compared to conventional investments. In this thesis, we compare a socially responsible (SR) portfolio composed of members of Jantzi Social Index (JSI) with two conventional portfolios between March 2003 to December 2015. The members of the conventional portfolios match the industry and size of the companies in our SR portfolio. The SR and matched portfolios are compared on several dimensions, including risk-adjusted return measures. We find that our SR portfolio outperforms the matched portfolios based on all commonly used risk-adjusted return measures. In addition, by performing an event study, we find that while market response is insignificant for companies that enter JSI, those that exit this index experience a significantly negative effect on their returns.