Socially Responsible Investment:A Case Study Of A Negatively Screened S&P 500 Fund From 1990-2018

Abstract

In daily life, humans tend to not exhibit pure selfishness. Some level of altruism is in most individuals' self-interest. Does the same hold true for investment? This paper argues that it is in an individual's interest to invest in a cause he supports. I examine socially responsible investing and its impact on fund performance. I then construct my own socially responsible fund by negatively screening components (yielding a separate, ‘unethical' fund) from Standard and Poor's S&P500 Index. I examine the ethical and unethical funds' performance on a semi-annual basis from 1990-2018 and compare each portfolio's total return and risk-adjusted return to the underlying index and sets of random portfolios. I conclude that ethical funds do not outperform either traditional or ‘unethical' funds.