A Study on Socially Responsible Investing
A Project Submitted to
University of Mumbai for partial completion of the Degree of
Master in Commerce (Banking & Finance)
Under the Faculty of Commerce
By
Gauravkumar Patil
Semester IV
45210190037 - B022
Under the Guidance of
Assistant Professor Ms. Rishika Bhojwani
SVKM’S Narsee Monjee College of Commerce & Economics
(Autonomous)
April, 2021
DECLARATION
I the undersigned Mr. Gauravkumar A. Patil here by, declare that the work embodied in
this project work titled “A Study on Socially Responsible Investing”, forms my own
contribution to the research work carried out under the guidance of Asst. Prof. Rishika
Bhojwani is a result of my own research work and has not been previously submitted to any
other University for any other Degree/Diploma to this or any other University. Wherever
reference has been made to previous works of others, it has been clearly indicated as such
and included in the bibliography. I, here by further declare that all information of this
document has been obtained and presented in accordance with academic rules and ethical
conduct.
Signature of the Student
Signature of the Guide
Gauravkumar Patil
Asst. Prof. Rishika Bhojwani
1
ACKNOWLEDGMENT
Every research big or small is successful largely due to the efforts of a number of wonderful
people who have always given their valuable advice or lent a helping hand. I sincerely
appreciate the inspiration; support and guidance of all those people who have been
instrumental in making this research a success.
I am grateful to our Principal Dr. Parag Ajagaonkar, for giving me the opportunity to do
this research and providing his immense support throughout the process of this research.
At this juncture, I am deeply honoured in expressing my sincere thanks to my research guide
Asst. Prof. Rishika Bhojwani, for directing me through the whole process of my research
and providing valuable insights leading to the successful completion of my research.
My sincere thanks to all the teachers, Assistant Professors and other faculty members of
Narsee Monjee College of Commerce and Economics (Autonomous) for their kind
cooperation and assistance throughout the research in learning new concepts related to my
research. I would also like to thank all the library and non-teaching staff members of our
college for providing constant support and being very cooperative and providing invaluable
material for my research.
Last but not the least I place a deep sense of gratitude to my family members and my friends
who have been constant source of inspiration during the preparation of this project work.
2
Table of Contents
Ch. No. Particulars
Page No.
Cover Page
0
Declaration
1
Acknowledgement
2
Certificate
4
1
Introduction
5
2
Research Methodology
29
3
Literature Review
33
4
Data Analysis, Interpretation and Presentation
49
5
Conclusions
64
Bibliography
Appendix
3
SVKM’s Narsee Monjee College of Commerce & Economics
(Autonomous)
CERTIFICATE
This is to certify that Mr. Gauravkumar Patil has worked and duly completed his Project
Work for the degree of Master in Commerce (Banking& Finance) under the Faculty of
Commerce and his project is titled, “A Study on Socially Responsible Investing” under my
supervision.
I further certify that the entire work has been done by the learner under my guidance and
that no part of it has been submitted previously for any Degree or Diploma of any University.
It is his own work and facts reported by his personal findings and investigations.
Seal of the
College
Date of Submission:
10th April 2021
External Examiner
Name and Signature of Guiding Teacher
Asst. Prof. Rishika Bhojwani
Principal
Dr. Parag Ajagaonkar
Internal Examiner
4
1. Introduction
Investing a technique, a process, that anyone with spare cash participates in. Why?
To further grow their wealth. Investing your money in the market, in various financial
instruments like stocks or bonds, in various financial markets like cryptocurrency or tech
sector, is done to further grow one’s wealth in a passive sort of way.
But what if the investor has a conscience? What if they are someone who holds high
morals and want to do everything in their life morally and ethically? What if they want those
moral and ethical values to transfer over to their investing activities too?
This is where “Socially Responsible Investing (SRI)” comes into the picture.
Socially responsible investing (SRI), also known as social investment, is an
investment that is considered socially responsible due to the nature of the business the
company conducts. Common themes for socially responsible investments include socially
conscious investing. Socially responsible investments can be made into individual
companies with good social value, or through a socially conscious mutual fund or exchangetraded fund (ETF).
Socially responsible investments include eschewing investments in companies that
produce or sell addictive substances (like alcohol, gambling, and tobacco) in favour of
seeking out companies that are engaged in social justice, environmental sustainability, and
alternative energy/clean technology efforts.
In recent history, “socially conscious" investing has been growing into a widelyfollowed practice, as there are dozens of new funds and pooled investment vehicles available
for retail investors. Mutual funds and ETFs provide an added advantage in that investors can
gain exposure to multiple companies across many sectors with a single investment.
5
However, investors should read carefully through-fund prospectuses in order to determine
the exact philosophies being employed by fund managers, along with the potential
profitability of these investments.
There are two inherent goals of socially responsible investing: social impact and
financial gain. The two do not necessarily have to go hand in hand; just because an
investment touts itself as socially responsible doesn't mean that it will provide investors with
a good return, and the promise of a good return is far from an assurance that the nature of
the company involved is socially conscious. An investor must still assess the financial
outlook of the investment while trying to gauge its social value.
Socially responsible investing has become a more politically polarizing topic due to
the fact that the popular vessel by which those invest in socially responsible ways revolves
around Climate Change, a cause that is viewed quite separately by different political factions.
Socially responsible investments tend to mimic the political and social climate of the
time. That is an important risk for investors to understand, because if an investment is based
on a social value, then the investment may suffer if that social value falls out of favor among
investors.
For this reason, socially responsible investing is often considered by investment
professionals through the lens of Environmental, Social and Governance (ESG) factors for
investing. This approach focuses on the company's management practices and whether they
tend towards sustainability and community improvement. There is evidence that a focus on
this approach can improve returns, whereas there is no evidence for investing success from
investing purely on social values alone.
For example, in the 1960s, investors were mainly concerned with contributing to
causes such as women's rights, civil rights, and the anti-war movement. Martin Luther King
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Jr. played a large role in raising awareness for the civil rights movement by targeting
companies that opposed the cause as socially irresponsible.
As awareness has grown in recent years over global warming and climate change,
socially responsible investing has trended toward companies that positively impact the
environment by reducing emissions or investing in sustainable or clean energy sources.
Consequently, these investments avoid industries such as coal mining due to the negative
environmental impact of their business practices.
The U.S. Department of Labour released a new regulation in late October 2020 that
may limit or eliminate socially responsible investing in retirement plans. While the rule was
revised to remove explicit references to environmental, social, and governance (ESG)
factors, it mandates that fiduciaries of retirement plans choose investment strategies based
entirely on how those strategies affect financial performance. This ruling may have a
significant impact on funds and investments classified under ESG and socially responsible
investing.
One example of socially responsible investing is community investing, which goes
directly toward organizations that both have a track record of social responsibility through
helping the community, and have been unable to garner funds from other sources such as
banks and financial institutions. The funds allow these organizations to provide services to
their communities, such as affordable housing and loans. The goal is to improve the quality
of the community by reducing its dependency on government assistance such as welfare,
which in turn has a positive impact on the community's economy.
1.1 Impact Investing
Impact investing is an investment strategy that aims to generate specific beneficial
social or environmental effects in addition to financial gains. Impact investments may take
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the form of numerous asset classes and may result in many specific outcomes. The point of
impact investing is to use money and investment capital for positive social results.
The term impact investing was first coined in 2007, but the practice was developed
years earlier. A basic goal of impact investing is to help reduce the negative effects of
business activity on the social environment. That's why impact investing may sometimes be
considered an extension of philanthropy.
Investors who use impact investing as a strategy consider a company's commitment
to corporate social responsibility (CSR), or the sense of duty to positively serve society as a
whole, before they become involved with that company. The type of impact that can evolve
from impact investing varies based on the industry and the specific company within that
industry, but some common examples include giving back to the community by helping the
less fortunate or investing in sustainable energy practices to help save our planet.
The bulk of impact investing is done by institutional investors, including hedge
funds, private foundations, banks, pension funds, and other fund managers.
However, a range of socially conscious financial service companies, web-based
investment platforms, and investor networks now offer individuals an opportunity to
participate, too. One major venue is microfinance loans, which provide small-business
owners in emerging nations with start-up or expansion capital. Women are often the
beneficiaries of such loans.
Impact investments come in many different forms of capital and investment vehicles.
Like any other type of investment class, impact investments provide investors with a range
of possibilities when it comes to returns. But the most important thing is that these
investments offer both a financial return and are in line with the investor's conscience.
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The opportunity for impact investments varies and investors may choose to put their
money into emerging markets (EM) or developed economies. Impact investments span a
number of industries including:

Healthcare

Education

Energy, especially clean and renewable energy

Agriculture
1.1.1 Socially Responsible Investing Vs. Impact Investing
SRI and impact investing are both mission-driven approaches to generating positive
outcomes through investment vehicles. Socially Responsible investing (SRI), also known as
values-based or ethical investing, refers to the practice of integrating social and
environmental factors within investment analysis to avoid investing in companies that have
negative impacts on the environment and/or society.
Impact investing integrates social and environmental factors in investment analysis,
similarly to SRI, but goes further by making investments in organizations, companies and/or
funds whose core mission is to generate social and/or environmental impact alongside
financial return. While both types of investments integrate nonfinancial factors in investment
analysis, the key differences between the two lie in the strategies used to accomplish positive
outcomes as well as financial return expectations.
Positive/Negative screening is a key difference between SRI and impact investing as
they indicate an investor’s level of activity in pursuing positive impact through investments.

Negative screening
Negative screening refers to an investor’s strategy to intentionally avoid
investing in companies or organizations that are counter to the investor’s
nonfinancial values. SRI investors and fund managers integrate negative
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screens in investment analysis to avoid investing in industries or companies
based on environmental and/or social factors; examples of negative screens
include avoiding investments in the alcohol, gambling, tobacco and military
industries. Often referred to as a “do-no-harm” approach, negative screening
is a relatively passive strategy to ensuring an investment portfolio does not
cause negative social outcomes.

Positive Screening
Positive screening, on the other hand, refers to the pursuit of investments in
companies and organizations that aim to generate a positive social and/or
environmental impact. Impact Investing takes an active approach to
generating positive impact by investing in companies whose core business
model integrates positive impact creation rather than just negative impact
avoidance. Examples of impact investments include investments in
organizations
that
support
underserved
communities,
community
development or sustainable energy.
Within mission-driven investing, there is varying prioritization of positive impact
creation in relation to financial returns.
In SRI, while investors aim to avoid investments in harmful companies and
industries, the intent is still to maximize financial returns. Thus, investment managers
practicing SRI have a fiduciary duty to their investors to make investment decisions in order
to generate the highest rates of return.
Impact investors, on the other hand, vary in their financial return expectations. While
some impact investors seek competitive or market-rate returns, others may be willing to
accept below market-rate returns in order to maximize impact.
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However, it is important to note that fiduciary responsibility to investors and pursuit
of positive impact are not necessarily mutually exclusive. For instance, in a study conducted
by the Wharton Social Impact Initiative, the majority of impact fund managers sampled
explicitly state their level of intention to pursue and generate impact in their limited-partner
agreements, private placement memorandums and other investment agreement documents.
As a result, some impact fund managers are legally obligated to meet the requirements set
forth by their investors regarding the extent to which impact factors are incorporated in
investment analysis.
In short, while SRI and impact investing have key differences, both fall within the
spectrum to which an investor can integrate mission into their portfolio. Both SRI and impact
investing rely on nonfinancial metrics to determine the impact – positive or negative – that
a company or organization may have on the environment or the surrounding community.
And, while one of the key differences between SRI and impact investing may be
financial return expectations, there is a growing body of evidence supporting the ability of
impact investments to produce and, at times, outperform the market rate of return when
compared to non-impact investments. Regardless of the approach used by investors, both
SRI and impact investing are a testament to the various ways values-based investing can be
incorporated into an investment strategy.
1.1.2 Impact Investment Funds in India
While such type of investment strategy is relatively new in India, following are few
VCs following this sort of investment strategy—

Caspian Impact Investments
Location = Hyderabad
Focus = Financial inclusion, food and agriculture, affordable housing,
healthcare, and clean energy
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
Unitus Capital
Location = Bangalore
Focus = Affordable healthcare, renewable energy, education, women
empowerment, and agriculture

Aavishkar
Location = Mumbai
Focus = Agriculture, dairy, education, health, water and sanitation,
handicrafts, and technology for development, microfinance, and financial
inclusion

Villgro
Location = Chennai
Focus = Health, education, agriculture, and energy

Social Alpha
Location = Bengaluru
Focus = Agritech, assistive tech, clean tech, edtech, medtech, and urban tech

Lok Capital
Location = Chennai
Focus = Agriculture and livelihoods, healthcare, and financial inclusion

Acumen
Location = Multiple International Offices
Focus = Clean energy, education, agriculture, and healthcare
1.2 Environmental, Social, and Governance (ESG)
Environmental, social, and governance (ESG) criteria are a set of standards for a
company’s operations that socially conscious investors use to screen potential investments.
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Environmental criteria consider how a company performs as a steward of nature. Social
criteria examine how it manages relationships with employees, suppliers, customers, and the
communities where it operates. Governance deals with a company’s leadership, executive
pay, audits, internal controls, and shareholder rights.
In recent years, as younger investors, in particular, have shown an interest in putting
their money where their values are, brokerage firms and mutual fund companies have begun
to offer exchange-traded funds (ETFs) and other financial products that follow ESG criteria.
Robo-advisors such as Betterment and Wealthfront have also used them to appeal to these
investors. According to the most recent report from US SIF Foundation, investors held $11.6
trillion in assets chosen according to ESG criteria at the beginning of 2018, up from $8.1
trillion just two years earlier.
ESG investing is sometimes referred to as sustainable investing, responsible
investing, impact investing, or socially responsible investing.
1.2.1 How do ESG Criteria Work?
To assess a company based on environmental, social, and governance (ESG) criteria,
investors look at a broad range of behaviours.

Environmental criteria
It may include a company’s energy use, waste, pollution, natural resource
conservation, and treatment of animals. The criteria can also be used in
evaluating any environmental risks a company might face and how the
company is managing those risks. For example, are there issues related to its
ownership of contaminated land, its disposal of hazardous waste, its
management of toxic emissions, or its compliance with government
environmental regulations?

Social criteria
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This criteria may look at the company’s business relationships. Does it work
with suppliers that hold the same values as it claims to hold? Does the
company donate a percentage of its profits to the local community or
encourage employees to perform volunteer work there? Do the company’s
working conditions show high regard for its employees’ health and safety?
Are other stakeholders’ interests taken into account?

Governance Criteria
With regard to governance, investors may want to know that a company uses
accurate and transparent accounting methods and that stockholders are given
an opportunity to vote on important issues. They may also want assurances
that companies avoid conflicts of interest in their choice of board members,
don't use political contributions to obtain unduly favourable treatment and, of
course, don't engage in illegal practices.
No single company may pass every test in every category, of course, so investors
need to decide what's most important to them. On a practical level, investment firms that
follow ESG criteria must also set priorities. For example, Boston-based Trillium Asset
Management, with $2.8 billion under management as of March 2020, uses a selection of
ESG factors to help identify companies positioned for strong long-term performance.
Determined in part by analysts who identify issues facing different sectors and industries,
Trillium's ESG criteria include avoiding companies with known exposure to coal mining and
those a certain percentage of their revenues from nuclear power or weapons. It also avoids
investing in companies with major recent or ongoing controversies related to workplace
discrimination, corporate governance, and animal welfare, among other issues.
1.2.2 Reasons for Growth

A move towards greener economy
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Under the Paris agreement, in 2015, India filed its Nationally Determined
Contributions, for the period 2021-2030. This states an investment of an
estimated USD 2.5 trillion between 2015 and 2030. India is also committed
to achieving the Sustainable Development Goals (SDGs) to carry forward its
mission of development without destruction.

Turning it into a global plan
Factors like business ethics awareness, corporate governance and business
risks, are prompting businesses to be more pro-active. More companies now
know the benefits of ESG investing. Incidentally, global ESG funds are also
investing in India. According to the Global Sustainable Investment Alliance
(GSIA), 41 Global E&S seeking funds have invested on an average 25
percent of their funds in India equities. In the future, there could be more ESG
investing in India.

Gradual interest from domestic investors
Increasingly, domestic investors such as SBI, Quantum, and Kotak Mahindra
are taking a significant part in ESG investing. They are warming up to
sustainable investments. Asset management companies are signing up to UNsupported principles for responsible investment. Over the last few years, the
Indian investment market has seen the entry of quite a few ESG funds.
Avendus launched India’s first ESG-based fund in 2019. Around the same
time, Quantum Asset Management Company launched its first open-ended
ESG fund- Quantum India ESG Equity Fund. Quantum launched this to
achieve long-term capital appreciation by investing in a share of companies
that meet Quantum’s ESG criteria.

Increasing reform measures
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India has been witnessing a slew of reform measures to drive investments in
emerging sectors such as renewable energy, several voluntary and mandatory
guidelines to drive ethical corporate behaviour and reporting on material ESG
factors.

Sustainability indices in India
In recent years, quite a few indices have come up to track, motor and measure
the ESG performance of various companies. Some of those are as followsS&P BSE Greenex, S&P BSE Carbonex, S&P BSE 100 ESG Index, NIFTY
100 ESG Index, and NIFTY 100 Enhanced ESG Index.
These developments and measures have led to the growth of ESG investing
in India and the world. In the US, net flows into sustainable funds reached
$20.6 billion in 2019, more than four times than that in 2018. In India, the
size of the Socially Responsible Investment (SRI) asset base stands at USD
28 billion, which is 0.1 percent of the global SRI assets. Domestic asset
managers mainly drive this growth.
1.2.3 Top ESG Funds in India
Following are few of the top ESG funds available for investing in India—

SBI Magnum Equity ESG Fund

Axis ESG Equity Fund

ICICI Prudential ESG Fund

Kotak ESG Opportunities Fund

Aditya Birla Sun Life ESG Fund

Invesco India ESG Equity Fund

Mirae Asset ESG Sector Leaders ETF

Quantum India ESG Equity Fund
16

Quant ESG Equity Fund
1.3 Green Investing
Often conflated with socially responsible investing (SRI), green investments are
investment activities that focus on companies or projects committed to the conservation of
natural resources, the production and discovery of alternative energy sources, the
implementation of clean air and water projects, or other environmentally conscious business
practices. Green investments may fit under the umbrella of SRI, but they are fundamentally
much more specific.
Pure-play green investments are those that derive all or most of their revenues and
profits from green activities. Green investments can also be made in companies that have
other lines of business but also focus on green-based initiatives or product lines.
The term "green," despite becoming a nearly ubiquitous one, can be somewhat vague.
When people talk about "green investments," they're speaking generally of investing in
activities that, in a popular context, can be considered good for the environment directly or
indirectly.
Some of the options an investor has if they want to build a green portfolio include
securities, mutual funds, ETFs, and bonds. Green mutual funds include the TIAA-CREF
Social Choice Equity Fund (TICRX); Portfolio 21 Global Equity Fund Class R (PORTX);
and the Green Century Balanced Fund (GCBLX). Green bonds can sometimes be offered by
governments and generate revenue for funding projects or businesses.
Because individual beliefs on what constitutes a "green investment" vary, what
qualifies as a green investment is a bit of a grey area. Some investors want only pure-play
options like companies that do research into or make products like renewable fuels and
17
energy-saving technology. Other investors put money behind companies that have good
business practices in how they use natural resources and manage waste but also draw their
revenue from multiple sources.
Purchasing stock in a business that leads in employing environmentally conscious
business practices in a traditionally "ungreen" industry may be considered a green
investment for some but not for others. For example, consider an oil company that has the
best record for environmental practices. While it is environmentally sound that the company
is taking precautions to limit direct damage to the environment, some people may object to
purchasing its stock as a green investment because burning fossil fuels is the leading
contributor to global warming.
Investing in "green" companies can be riskier than other equity strategies as many
companies in this arena are in the development stage, with low revenues and high earnings
valuations. However, if encouraging eco-friendly businesses is important to investors, green
investing can be an attractive way to put their money to work.
All investors should be wary of companies that simply bill themselves as green for
branding purposes without following through with their pledges. Therefore, prospective
green investors should research their investments (by checking out a green fund's prospectus
or a stock's annual filings) to see if an investment includes the types of companies that fit
their definition of "green."
1.3.1 Green Investing Opportunities

Water Stocks
Ion Exchange Ltd., VA Tech Wabag, Triveni Engineering and Industries Ltd.,
Thermax, Avanti Feeds Ltd.

Wind Power
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Inox Wind, Indowind Energy Ltd., Orient Green Power, Karma Energy Ltd.,
Tata Power

Solar Energy
Solar Industries India, Adani Group, NTPC Ltd., Surana Solar, WAA Solar
Ltd., Websol Energy Systems Ltd.

Pollution Controls
Enviro-Clean Systems Ltd., Fuel-Tech, VanEck Vectors Environmental
Services ETF, Invesco Cleantech ETF

Green Transportation
Tesla, Ballard Power Systems, FuelCell Energy

Waste Reduction
Republic Services, Waste Management, Covanta

Organics
United National Foods

Aquaculture
Mowi ASA

Geothermal
Ormat Technologies
1.4 Faith-based Investing
Faith isn’t faith until it’s all you’re holding on to. Socially responsible investing may
have taken off globally, but it’s not faith alone that’s responsible for its allure. Investors’
preference to make money, while at the same time having a clear conscience, has meant that
faith-based products are gaining ground across the world.
19
Faith-based investing a type of investment strategy that is tied into investor’s
religious and moral beliefs. No, that does not mean one can buy stock in a church or temple
or mosque. Religious institutions are a form of non-profit organizations and don't issue stock,
but that doesn't mean that religion plays no role in investing. In fact, just about every major
religious denomination has an opinion about how to deploy cash in support of favoured
causes and against those that contradict their views and values.
While religious-based investment rules have a wide variety of interpretations based
on the teaching of specific organizations, the strategies of certain mutual fund managers,
mandates from religious leaders and so on, many religious institutions have direct
investments in the stock and bond markets, real estate and more. Following these same
strategies is certainly a potential avenue for investors, as is investing with professional
investment managers who base their investment strategies on certain well-defined, religiousbased values.
While churches do not sell securities directly to investors, the investment principles
followed by religious groups are often publicly available and easy to find. Investors who
wish to put their money where their faith is won't find it hard to do.
Total assets under management in faith-based funds have grown to over $31 billion
(Rs 140,000 crore) from less than $500 million (Rs 2,000 crore) just 11 years ago, according
to US-based investment research firm, Morningstar.
Following are the few investment strategies advocated by some of the major religious
groups—

Catholic
Investors wishing to put their money to work in a manner consistent with
Catholic values often seek to avoid investing in firms that pay domestic
partner benefits to unmarried or same-sex couples, support abortion,
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contraceptives, embryonic stem-cell research and weapons of mass
destruction. They often favour firms that support human rights,
environmental responsibility and fair employment practices via the support
of labour union.
Multiple entities provide guidance on investing in a manner that supports
Catholic values, and there are mutual fund firms that follow those guidelines
for investors who prefer not to take the "do it yourself." approach. The LKCM
Aquinas Funds, for example, follows the Socially Responsible Investment
Guidelines set by the U.S. Conference of Catholic Bishops. Another fund
family, Ava Maria Mutual Funds, practices "morally responsible investing"
guided by the "Catholic Advisory Board, which is loyal to the Magisterium
of the Roman Catholic Church."

Islamic
Investors seeking to follow Islamic religious principles generally avoid socalled sin stocks, such as those issued by firms that profit from alcohol,
pornography or gambling. They are also prohibited from owning investments
that pay interest or firms that earn a substantial part of their revenue from
interest. Some Islamic investors also seek to avoid companies that carry
heavy debt loans (and therefore pay interest). Investments in pork-related
businesses are also not permitted.
A variety of mutual fund firms offer strategies based on Islamic values.
Amana Mutual Funds invests in a manner consistent with Islamic teaching.
Generally, these principles require that investors avoid interest (Riba) and
investments in businesses such as liquor, pornography, gambling, and banks.
The Funds avoid bonds and other interest-bearing securities while seeking
protection against inflation by making long-term equity investments. The
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Iman Fund, offered by Allied Asset Advisors, is another mutual fund with a
strategy based on "investments that meet Islamic principles."

Jewish
Investors seeking to follow Jewish practices with their investment portfolios
generally begin with the concept of diversification, dictated in the Talmud.
Throughout Jewish religious teachings, there are multiple references to the
importance of diversification and those references have become a cornerstone
guiding tenets of investment practices. While less formal than some of the
other religions, socially responsible investing is often closely associated with
Jewish-oriented investment strategies.
Mutual funds that follow Jewish investment strategies provide multiple
interpretations of Jewish investing. Through The Calvert Foundation, an
organization closely affiliated with the socially responsible Calvert Funds,
The Jewish Funds for Justice Community Investment Initiative seeks to
provide compassionate use of money to foster community development in
areas such as "affordable housing, small businesses and community facilities
that are in need of affordable capital." This mandate is based on the Jewish
belief in helping the poor. Another mutual fund investment opportunity is
available through the AMIDEX35 Israel Mutual Fund, which "is the only
Israel index mutual fund investing exclusively in Israeli companies traded on
Tel Aviv and U.S. markets." While not strictly religiously based in the
traditional sense, this fund is more oriented toward support for Zionism.

Protestant
Hard work and thriftiness tend to go hand in hand with the Protestant work
ethic, so working and saving are often closely associated activities. Protestant
denominations include a range of beliefs from liberal to conservative and tend
22
to encourage individuals to make investments based on broad Christian
values such as social consciousness. In some instances, such as with the
Church of England, investment policies are detailed and easy to find. For
example, the Church of England has an Ethical Investment Advisory Group
that "supports the Church of England's national investing bodies on ethical
investment." They actively engage corporations on a variety of issues and
discourage investments in "sin stocks," defined as those affiliated with
"tobacco, gambling, alcoholic drinks, high-interest lending or human
embryonic cloning." They also seek to avoid firms that cause environmental
damage from greenhouse gasses and businesses that do not engage in fair
trade. Local support of British farmers is included in their mandates.
A number of mutual funds follow Protestant principles. For example,
Guidestone Funds provide "Christian-based, socially screened" investments,
and New Covenant Funds makes "investment decisions consistent with the
social-witness principles adopted by the General Assembly of the
Presbyterian Church." New Covenant Funds "may also limit investments in
companies involved in gambling, alcohol and firearm-related issues."
1.4.1 Faith-based Funds in India
Despite being a hot-pot of religions, India has very few faith-based funds and ones
that are available are all working under the Islamic law of Shariah called Shariah Compliant
Funds.
In 2010, India had also launched indices for such funds—S&P BSE 500 Shariah,
Nifty Shariah 25, Nifty 50 Shariah and Nifty 500 Shariah.
The three Shariah Compliant Funds available in India are as follows—

Tata Ethical Fund
23
Currently, this fund has around 57% of its investment in large-cap companies
and 42% in mid and small-cap companies. It has given a return of 11.61%
over the previous 5-year period as of 27 January 2021.

Taurus Ethical Fund
Currently, this fund has half of its assets invested in large-cap companies and
the rest of its assets in small-cap and mid-cap companies. It has given a return
of 13.03% over the previous 5-year period as of 27 January 2021.

Nippon India ETF Shariah Bees
This scheme invests at least 90% of its assets in equity securities which are
the constituents of the CNX Nifty Shariah index and have the same allocation
of assets as the index. It has given a return of 15.76% over the previous 5year period as of 27 January 2021.
1.5 Sin Stocks
A sin stock is a publicly traded company involved in or associated with an activity
that is considered unethical or immoral. Sin stocks are generally in sectors that deal directly
with morally dubious actions. They are perceived as making money from exploiting human
weaknesses and frailties.
Sin stock sectors usually include alcohol, tobacco, gambling, sex-related industries,
and weapons manufacturers. However, they can also be defined by regional and societal
expectations that vary widely across the globe. For example, brewing has a long tradition in
much of the world, so alcohol stocks are not necessarily considered sin stocks by everyone.
Political leanings can also influence what is branded as a sin stock. Some people's lists will
include all military contractors, while others may consider supporting the military a patriotic
duty. Also known as "sinful stocks," sin stocks sit on the opposite end of the spectrum from
24
ethical investing and socially responsible investing. The goal of these other investing styles
is to seek out investments that yield an overall benefit for society.
Sin stocks are difficult to classify with any certainty, as sin depends on an investor's
personal feelings toward an industry. That said, tobacco firms like Phillip Morris are often
on the list, as are alcohol producers like Anheuser-Busch. Weapons manufacturers like
Smith & Wesson make the list too. However, General Dynamics may not, depending on
your views about providing weapons systems to the military. Of course, many gambling
stocks are tied to hotels, such as Caesars Entertainment Corporation or Las Vegas Sands
Corp. It can be hard to disentangle the sin portions of some businesses.
1.5.1 Benefits of Sin stocks
You don't invest in sin stocks just for the thrill of being naughty. Owning them can
be an attractive financial strategy.

They're steady performers
Sin stocks are considered "defensive" stocks, meaning they tend to perform
well even during an economic downturn or recession. People who regularly
smoke, drink, or gamble don't stop doing these things when times are bad,
whether because they're physically addicted or because they enjoy these
activities as a way to escape and unwind, however un healthfully. And of
course, they might indulge even more when times are good.

They're cash cows
As a result, sin stocks are known for their stable earnings and income streams.
Many companies in sin industries are well-established, have sound financials,
and have consistently paid dividends for years.

They've got little competition
25
The goods and services that sinful companies produce tend to be highly
subject to law. Potential competitors may be loath to enter such enterprises,
creating more room for the existing players. Even sin stocks' negative
connotations can work to their advantage. Certain institutional investors —
especially those handling funds for religious or academic groups — often shy
away from notorious or controversial businesses. That can lead to a particular
sin stock being undervalued and a good bargain.
1.5.2 Disadvantages of Sin stocks
Even if you have no moral or ethical qualms about investing in sin stocks, you should
consider their potential financial drawbacks before adding them to your portfolio.

There's high regulatory risk
All companies' fortunes can be contingent on laws, but regulatory risk is a
particular concern with sin stocks. Marijuana might become legal at the
federal level, but what happens if, instead, U.S. states reverse the legality of
medical or recreational marijuana? Defense spending and gun control
regulations can change depending on who rules a country, international
relations, and terrorist activity.

Taxes can be a problem
All companies have to deal with taxation, but sin stocks often have a fiscal
target on their backs. Regulators and voters could decide to increase taxes on
the "sinful" items these companies produce; they're often the go-to source
when states need money. Higher taxes could reduce demand, dampen profits,
and push stock prices down.

Consumer habits can change
26
You'll also want to consider the effect of changing consumer tastes, like
declining alcohol and tobacco consumption. Black swan events can force
habits to change, such as a pandemic shutting down casinos and the sporting
events people like to bet on. Finally, devoting too much of your portfolio to
a single industry or company is always risky, no matter whether that company
produces organic vegetables or nuclear warheads.
1.5.3 Investment Opportunity in Sin Stocks
A variety of corporations could be called sin players. The categories include the
traditional Big Four of the sin stock sector, along with some newer but commonly cited
fields.

Alcohol
Anheuser-Busch InBev, Molson Coors Brewing Company, Boston Beer
Company, Constellation Brands, Diageo, Brown-Forman

Defense/Weapons
Boeing, Northrup Gruman, Aerojet Rocketdyne, Raytheon, Lockheed Martin,
American Outdoor Brands, Olin, Vista Outdoor, Sturm, Ruger

Tobacco
Altria, British American Tobacco, Philip Morris

Gambling/Adult Entertainment
Las Vegas Sands, MGM Resorts, Wynn Resorts, Penn National Gaming,
Caesars Entertainment, Boyd Gaming, Scientific Games, DraftKings, RCI
Hospitality Holdings

Marijuana/Cannabis
Cronos, Canopy Growth, Aurora Cannabis, Aphria, Tilray, GrowGeneration

Corrections/Prisons
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CoreCivic, GEO Group

Payday Lenders
World Acceptance Corp., Enova International

Energy
Energy Transfer LP, ExxonMobil, Kinder Morgan

Meat
Hormel Foods, Sanderson Farms, Tyson Foods

Snacks/Junk Food
Coca-Cola, Mondelez International, Hershey, PepsiCo, McDonald's
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2. Research Methodology
2.1 Objectives

To study about the socially responsible form of investing methods and techniques.

To learn about the Impact investing and Green Investing.

To study the nature of ESG Funds and their performance in the market.

To study the Faith-based investing methods and the sin stock market.

To learn about Investors’ perception towards such type of investment methods and
their willingness in participating in such form of investments.
2.2 Hypothesis
1. H1 = More than half of the investors are aware of SRI
H0 = Less than half of the investors are aware of SRI
2. H1 = More than half of the investors think Ethical and Socially Responsible
Companies is an important decision making factor
H0 = Less than half of the investors think Ethical and Socially Responsible
Companies is an important decision making factor
3. H1 = More than half of the investors would invest in SRI funds
H0 = Less than half of the investors would invest in SRI funds
4. H1 = More than half of the investors would choose Green Investing
H0 = Less than half of the investors would choose Green Investing
5. H1 = More than half of the investors would invest in Faith-based funds
H0 = Less than half of the investors would invest in Faith-based funds
6. H1 = Less than half of the investors would invest in Sin Stocks
H0 = More than half of the investors would invest in Sin Stocks
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7. H1 = More than half of the investors would choose Ethical and Socially Responsible
funds over high-return funds
H0 = Less than half of the investors would choose Ethical and Socially Responsible
funds over high-return funds
8. H1 = If given an option, investors would choose an ethical fund with low returns
H0 = If given an option, investors would choose a sinful stock fund with high returns
9. H1 = SRI funds are profitable investments
H0 = SRI funds are not profitable investments
10. H1 = SRI funds are more profitable than traditional funds
H0 = SRI funds are not more profitable than traditional funds
2.3 Scope of the Study
This study can be beneficial to the investors, students and teachers of commerce and
management, researchers, etc. Present study will fulfil the following objectives:

This study will focus on various forms of socially responsible investments.

It will also focus on the advantages and risks involved in such form of investment
techniques.

It will also focus on the profitability aspect of such market.

This study will also focus on analysing the behaviour patterns of investors
regarding such forms of investments.
2.4 Limitations of the Study

Since Socially Responsible Investment strategy is a relatively newer form of
investment, the data on it is relatively scarce in nature.
30

The terms SRI, ESG, Green investments and Impact Investing, while mean
different things, are often interchangeable in general discussions. This makes
finding specific data about specific method of investments very difficult.

The primary data collected through the form of survey was done to analyse the
behaviour pattern of investors among different age groups regarding the socially
responsible strategy of investment. Since the sample was selected randomly, the
data collected did not feature a lot of investors above the age of 40.

Lot of the factors affecting this type of strategy are non-financial factors. This
makes it difficult to analyse the results as there’s not enough numerical data to
back the hypothesis.
2.5 Significance of the Study
This present study is significant for the following reasons:

To better understand such form of investments and markets.

To understand the risks and rewards involved in such investing techniques.

To understand the behaviour of the market or other investors regarding the
performance of such alternative form of investments methods.

To understand the profitability of such investments.
2.6 Sample Selection and Data Collection Method
2.4.1 Universe
The sample frame for all the primary data was randomly selected through online
survey.
31
2.4.2 Procedure of Sample Selection and Sample Size
Since the universe of the study is very big; for the primary data, a random sampling
method is considered for the sample selection consisting a sample of 50 people.
For secondary data, the financial performances of several ESG Funds were taken into
the analysis. Along with that, financial performances of non-ESG Funds were considered
too for the purpose of comparative analysis. Financial performances of Sin stocks were taken
too to see how profitable they were compared to ethical stocks.
2.4.3 Sources of Data
 Primary Data
Primary Data for this study was taken through the means of online survey of
randomly selected 50 potential investors by asking them 11 questions.
 Secondary Data
Various Internet articles, Company sites, Research Papers, etc.
32
3. Literature Review
3.1 Impact Investing
By Brad M. Barber, Adair Morse, Ayako Yasuda; Journal of Financial Economics, Vol 139,
Issue 1, January 2021, Pages 162-185
This paper shows that investors derive nonpecuniary utility from investing in dualobjective Venture Capital (VC) funds, thus sacrificing returns. Impact funds earn 4.7
percentage points (ppts) lower internal rates of return (IRRs) ex-post than traditional VC
funds. In random utility/willingness-to-pay (WTP) models investors accept 2.5–3.7 ppts
lower IRRs ex ante for impact funds. The positive WTP result is robust to fund access
rationing and investor heterogeneity in fund expected returns. Development organizations,
foundations, financial institutions, public pensions, Europeans, and United Nations
Principles of Responsible Investment signatories have high WTP. Investors with mission
objectives and/or facing political pressure exhibit high WTP; those subject to legal
restrictions (e.g., Employee Retirement Income Security Act) exhibit low WTP.
3.2 Impact investing: review and research agenda
By Anirudh Agarwal, Kai Hockerts; Journal of Small Business & Entrepreneurship, Vol 33,
Issue 2, 2021, Pages 153-181
Impact investing is an emerging alternative asset class. In the last few years, the
investment in impact investing has grown many folds, however the research has not kept
pace with the growing practitioner interest. The lack of knowledge about the field coupled
with the lack of knowledge production of field might be dangerous in the long run. This is a
systematic review of impact investing. This systematic review involves study of 85
published articles and reports. This literature was collected using the harzing’s publish or
perish academic search engine and cross-checked against databases such as JSTOR and Web
33
of Science. This review has four major contributions. First, the study reveals a unique
longitudinal perspective on how the field is evolving and moving from pre-paradigm stage
to the stage of proper scientific inquiry. It reveals that the field is evolving, as the reviewed
literatures find that a higher number of empirical works were published recently. Second,
the field impact investing is unique on six characteristics namely (1) capital invested, (2)
degree of engagement with the investee, (3) process of selection, (4) social and commercial
outcomes, (5) reporting outcomes, and (6) government role. Third, it reveals that the
scholarship in the field has been mostly exploratory. Only recently the field is engaging in
confirmatory studies. The research methods have used existing databases or existing single
or multiple case studies. Finally, the field has to delve deeper into concepts like selection
process, stakeholder management, opportunity recognition, and performance reporting to
move the field forward and generate applied knowledge.
3.3 Socially Responsible Investment
By Russell Sparkes; Journal of Small Business & Entrepreneurship, Volume II. Investment
Management and Finance Management, 2008
Socially responsible investment (SRI), also known as ethical investment, is an
investment discipline that adds concerns about social or environmental issues to the normal
ones of risk and return as determinants of equity portfolio construction or activity. SRI has
three distinctive techniques, which may overlap or follow sequentially: exclusion, activism,
and dialogue or engagement. Exclusion avoids investment in certain companies whose
operations are judged unacceptable, while activism involves using the rights of share
ownership to assert social objectives. SRI may be carried out by individuals, normally
through mutual funds, or by institutions such as charitable foundations and pension funds.
Barriers to institutional investors adopting SRI strategies include concerns about the impact
on investment performance, and perceived legal restrictions.
34
3.4 The Heterogeneity of Socially Responsible Investment
By Joakim Sandberg, Carmen Juravle, Ted Martin Hedesström, Ian Hamilton; Journal of
Business Ethics, Vol 87, Article Number 519, 2009
Many writers have commented on the heterogeneity of the socially responsible
investment (SRI) movement. However, few have actually tried to understand and explain it,
and even fewer have discussed whether the opposite – standardisation – is possible and
desirable. In this article, they take a broader perspective on the issue of the heterogeneity of
SRI. They distinguish between four levels on which heterogeneity can be found: the
terminological, definitional, strategic and practical. Whilst there is much talk about the
definitional ambiguities of SRI, they suggest that there is actually some agreement on the
definitional level. There are at least three explanations which we suggest can account for the
heterogeneity on the other levels: cultural and ideological differences between different
regions, differences in values, norms and ideology between various SRI stakeholders, and
the market setting of SRI. Discussing the implications of the three explanations for the SRI
market, they suggest that there is reason to be sceptical about the possibilities of
standardisation if not standardisation is imposed top-down. Whether this kind of
standardisation is desirable or not, they argue, depends on what the motives for it would be.
To the extent that standardisation may facilitate the mainstreaming of SRI, it could be a good
thing – but they entertain doubts about whether mainstreaming really requires
standardisation.
3.5 The Maturing of Socially Responsible Investment: A Review of the
Developing Link with Corporate Social Responsibility
By Russell Sparkes & Christopher J. Cowton; Journal of Business Ethics, Vol 52, 2004,
Pages 45-57
35
This paper reviews the development of socially responsible investment (SRI) over
recent years and highlights the prospects for an increasingly strong connection with the
practice of corporate social responsibility. The paper argues that not only has SRI grown
significantly, it has also matured. In particular, it has become an investment philosophy
adopted by a growing proportion of large investment institutions. This shift in SRI from
margin to mainstream and the position in which institutional investors find themselves is
leading to a new form of SRI shareholder pressure. Although this bears some resemblance
to lobbying campaigns which might take advantage of shareholder rights, they seek to
distinguish it as an important phenomenon in its own right — one to which corporate
executives are likely to be paying increasing attention in the years to come. They further
argue that this approach potentially meets some of the earlier ethical criticisms of certain
forms of SRI but, ironically, probably owes its existence to those pioneering approaches.
They conclude with some suggestions for further research to inform discussion of the issues
highlighted in the paper.
3.6 Social Issues and Socially Responsible Investment Behaviour: A Preliminary
Empirical Investigation
By Barry N. Rosen, Dennis M. Sandler, David Shani; Journal of Consumer Affairs, 1991
An important dimension of the ongoing trend toward greater corporate social
responsibility is the emergence of individual and institutional investors who invest in
companies that support social objectives. While a small number of studies have examined
the criteria used by institutions, no studies have looked at individual investors. Using a mail
survey of 4,000 investors in two mutual funds that incorporate social screens in their
investment decisions, this study finds that compared with other investors, socially
responsible investors are younger and better educated. Respondents most frequently identify
environmental and labour relations issues when asked what defines socially responsible
36
corporate behaviour. Although the respondents value socially responsible behaviour in
companies they invest in, they are unwilling to sacrifice financial returns to achieve it.
3.7 The Investment Performance of Socially Responsible Investment Funds in
Australia
By Stewart Jones, Sandra van der Laan, Geoff Frost & Janice Loftus; Journal of Business
Ethics, Vol 80, 2008, Pages 181-203
Interest in the notion of the possible financial sacrifice suffered by socially
responsible investment (SRI) fund investors for considering ethical, social and
environmental issues in their investment decisions has spawned considerable academic
interest in the performance of SRI funds. Both the Australian and international research
literature have yielded largely mixed results. However, several of these studies are hampered
by methodological problems which can obscure the significance of reported results, such as
the use of small sample sizes, inconsistencies in the time frames selected to analyse
performance and different modelling frameworks used to estimate investment returns. This
study attempts to redress some of these issues by investigating the returns performance of
89 ethical funds in Australia over the period 1986–2005. Using a multi-factor CAPM model
[Fama, E. F., and K. R. French (1996) J. Finance 51(1), 55] (which controls for factors such
as size, book-to-market value and momentum) we find that ethical funds significantly underperform the market in Australia, particularly in the most recent 5 years of our sample period
(2000–2005). Risk adjusted returns (using Jensen’s alpha) indicate that average annual
underperformance is around 1.52% in the 2000–2005 period for our sample and .88% over
the whole sample period. Our results contrast with many previous studies (both Australian
and international), which have not found statistically significant differences in the
performance of ethical funds relative to market benchmarks and/or a matched sample of
conventional funds.
37
3.8 The stocks at stake: Return and risk in socially responsible investment
By Rients Galema, Auke Plantinga, Bert Scholtens; Journal of Banking & Finance, Vol 32,
Issue 12, December 2008, Pages 2646-2654
This study relates to US portfolio returns, book-to-market values and excess stock
returns to different dimensions of socially responsible performance. They find that socially
responsible investing (SRI) impacts on stock returns by lowering the book-to-market ratio
and not by generating positive alphas. Their result is consistent with the theoretical work
suggesting that SRI is reflected in demand differences between SRI and non-SRI stock. It
also explains why so few studies are able to establish a link between alpha’s and SRI.
3.9 ESG-persistence in Socially Responsible Mutual Funds
By Maximilian Wimmer; Journal of Management and Sustainability, Vol 3, Issue 1, 2013
This paper analyses the persistence environmental, social and governance (ESG)scores in socially responsible (SR) mutual funds. ESG-scores can be used as a measure for
the level of social responsibility of an SR mutual fund. It is shown that ESG-scores persist
for approximately two years. However the persistence of ESG-scores is terminated after
approximately three years. This implies that value-driven investors of SR mutual funds who
seek high-ESG investments cannot rely upon a long-term continuation of high ESG-scores
and thus need to rebalance their portfolio from time-to-time. The lack of long-term
persistence in the ESG-scores is caused by changes in the holdings of the SR mutual funds.
3.10 SRI Funds: Investor Demand, Exogenous Shocks and ESG Profiles
By Bialkowski, J., Starks, L.T.; Business and Law: Conference Contributions, 280
We provide evidence that investor demand for socially responsible or sustainable and
responsible (SRI) mutual funds differs from that of conventional funds in that flows to SRI
funds have shown greater growth and more persistence than flows to conventional funds.
38
More importantly, using a differences-in-differences approach we provide evidence that
these attributes appear to result from investors’ nonfinancial considerations. However, as
these funds have become more mainstream, there has been convergence in investor
resilience. We also find a high level of persistence in SRI funds’ ESG profiles, which are
generally different from those of conventional funds, consistent with their charters.
3.11 ESG and financial performance: aggregated evidence from more than 2000
empirical studies
By Gunnar Friede, Timo Busch, and Alexander Bassen; Journal of Sustainable Finance &
Investment, Vol 5, Issue 4, 2015, Pages 210-233
The search for a relation between environmental, social, and governance (ESG)
criteria and corporate financial performance (CFP) can be traced back to the beginning of
the 1970s. Scholars and investors have published more than 2000 empirical studies and
several review studies on this relation since then. The largest previous review study analyses
just a fraction of existing primary studies, making findings difficult to generalize. Thus,
knowledge on the financial effects of ESG criteria remains fragmented. To overcome this
shortcoming, this study extracts all provided primary and secondary data of previous
academic review studies. Through doing this, the study combines the findings of about 2200
individual studies. Hence, this study is by far the most exhaustive overview of academic
research on this topic and allows for generalizable statements. The results show that the
business case for ESG investing is empirically very well founded. Roughly 90% of studies
find a nonnegative ESG–CFP relation. More importantly, the large majority of studies
reports positive findings. We highlight that the positive ESG impact on CFP appears stable
over time. Promising results are obtained when differentiating for portfolio and non-portfolio
studies, regions, and young asset classes for ESG investing such as emerging markets,
corporate bonds, and green real estate.
39
3.12 A Study on SRI and ESG Investing
By Arpana D.; Asian Journal of Research in Business Economics and Management, Vol 3,
Issue 11, 2013, Pages 222-230
SRI and ESG "screens" are particular ways to determine what you have in your
investment portfolio. Socially responsible investing (SRI) is a steadily growing market
segment. Socially responsible investing is done to fund activities that have a high social
utility. It involves evaluating companies on CSR issues, analysing corporate social and
environmental risks, and engaging corporations to improve their CSR policies and practices.
More and more investors apply socially responsible screens when building their stock
portfolios. This raises the question whether these investors can increase their performance
by incorporating such screens into their investment process. SRI fund managers employ
several screens at the same time such as tobacco, alcohol, community, employee relations,
environment, and diversity. Indian investors are not ready for SRI funds as yet since there is
a feeling (even among high net worth investors) that fund managers will compromise on
returns for the sake of meeting social objectives. Socially responsible investing also has tax
advantage. SRI funds, currently, have $3 trillion in assets across the globe. SRI ratings are a
valuable information for investors. A simple trading strategy based on this publicly available
information leads to high abnormal returns. This immediately raises the question of where
this extra profit stems from. Does it result from a temporary mispricing in the market or does
it compensate for an additional risk factor? Answering this question seems to be a promising
avenue for future research. Investors who choose to place their money in socially responsible
investing product accept that their savings are invested in activities related to activities that
help people in difficulty, improving housing of society, protecting the environment or even
in international solidarity.
40
3.13 The business value of ESG performance: the Indian context
By Hemlata Chelawat, Indra Vardhan Trivedi; Asian Journal of Business Ethics, Vol 5, 2016,
Pages 195-210
Today, business corporations across the globe are moving beyond the short-term
myopic goal of profit maximization to long-term sustainability goals involving
environmental, social and corporate governance (ESG) goals. This is due to the growing
realization that ESG factors constitute a significant source of risk for the business and can
affect their financial returns. Academic research has shown that improved ESG performance
has lowered risk and enhanced financial performance but results seemed to vary widely
across countries. Regrettably, this subject remains largely un-researched in the context of
emerging economies, including India. This paper attempts to fill this much needed gap in
sustainability literature in one of the largest emerging market economies, India. It
empirically examines the impact of environmental, social and corporate governance (ESG)
performance of companies on their financial performance, in India, using panel regression
models. The findings of the study indicate that good corporate ESG performance enhances
financial performance. The findings of this study have important implications for investors,
corporate management as well as policymakers and regulators.
3.14 Risk-return and Volatility analysis of Sustainability Index in India
By S. Sudha; Environment, Development and Sustainability, Vol 17, 2015, Pages 1329-1342
Companies screened for their superior performance in environmental, social and
governance (ESG) parameters comprise the sustainability index introduced at global as well
as national stock exchanges. This study not only compares the performance of the
sustainability index of India—the S&P ESG India Index with two broad market indexes,
viz., the Nifty and the S&P CNX 500 using daily index data—but also analyses the inherent
conditional volatility using generalised autoregressive conditional heteroscedasticity
41
models. The results indicate that though the daily compounded returns to the ESG India
Index are not statistically different from those of the Nifty or those of the CNX 500,
annualised returns of the ESG India Index have been better than the returns of the other two
indexes. Thus, focussing on environmental and social sustainability is a win–win situation
for companies, investors and the society at large. There is significant volatility clustering in
all the three indexes. The ESG India Index has been less volatile compared with the Nifty
during the period. These results have corporate implications to focus on ESG parameters
seriously in order to benefit from its sensitivity in the stock markets. It also reflects upon
investor acceptance and potential for growth of socially responsible investments in India.
3.15 Do green mutual funds perform well?
By C. Edward Chang, Walt A. Nelson, H. Doug Witte; Management Research Review, Vol
35, Issue 8, 13 July 2012
The purpose of this paper is to compare the financial performance of green and
traditional mutual funds in the USA. A total of 131 green mutual funds identified by US SIF,
were compared with the averages of all traditional mutual funds in their respective
Morningstar categories. Performance measures analysed included annualized rates of return,
expense ratios, and Sharpe ratios, among others. Most data pertained to at least the past three
years, while other data pertained to the most recent 5 to 15 years. The results demonstrate
that green mutual funds have generated lower returns and similar risks compared to
traditional mutual funds in their respective Morningstar categories. Green mutual funds have
underperformed on a risk‐adjusted basis. Since there is no formal definition of a green
mutual fund, the researcher and investor must make a subjective call in assessing which
funds invest “green”. However, at least in this early stage in the history of green investing,
green mutual funds have underperformed their peers.
42
3.16 Green Investing: Is it Different from Socially Responsible Investing?
By James E. Malletta and Stuart Michelson; International Journal of Business, Vol 15, Issue
4, 2010
In this paper they examine the performance of green funds, socially responsible funds
(SRI), and index funds over time. For parametric and non-parametric tests, they find that
there is no real performance difference between green funds and SRI funds nor are there
differences for index funds and green funds. They do find marginal performance differences
between index funds and SRI funds, with the index funds showing better performance.
Comparing SRI and green funds have not been examined previously in the literature and
these results provide useful information for individual investors’ mutual fund decisions.
3.17 Green and Good? The Investment Performance of US Environmental
Mutual Funds
By Francisco Climent & Pilar Soriano; Journal of Business Ethics, Vol 103, 2011, Pages
275-287
Increased concern for the environment has increased the number of investment
opportunities in mutual funds specialized in promoting responsible environmental attitudes.
This article examines the performance and risk sensitivities of US green mutual funds vis-àvis their conventional peers. They also analyse and compare this performance relative to
other socially responsible investing (SRI) mutual funds. In order to implement this analysis,
they apply a CAPM-based methodology and find that in the 1987–2009 period, environmental funds had lower performance than conventional funds with similar characteristics.
However, if they focus on a more recent period (2001–2009), green funds achieved adjusted
returns not significantly different from the rest of SRI and conventional mutual funds.
43
3.18 ESG Investing: From Sin Stocks to Smart Beta
By Fabio Alessandrini and Eric Jondeau; Journal of Portfolio Management Ethical
Investing, Vol 46, Issue 3, 2020, Pages 75-94
Research on socially responsible investment in equity markets initially focused on
sin stocks. Since then, the availability of data has been extended substantially and now covers
environmental, social, and governance (ESG) criteria. Using ESG scores of firms belonging
to the MSCI World universe, the authors measure the impact of score-based exclusion on
both otherwise passive investment and smart beta strategies. They find that exclusion leads
to improved scores of initially standard portfolios without deterioration of the risk-adjusted
performance. Smart beta strategies exhibit a similar pattern, often in a more pronounced way.
Moreover, the results demonstrate that exclusion also implies regional and sectoral tilts as
well as (possibly undesirable) risk exposures of the portfolios.
3.19 The Performance of Sin Stocks in China
By Nuttawat Visaltanachoti, Qing Zheng, Liping Zou; Journal of International Financial
Services, Vol 11, Number 3, 2011
Sin stocks are publicly traded companies, which are involved in the production of
alcohol, tobacco, or gaming/gambling services. This research is the first to focus on the sin
stocks’ performance in Asian stock markets. It examines both sin stocks’ financial and
operating performances in the Chinese stock markets including a share in the Shanghai and
Shenzhen stock exchanges, and H shares in the Hong Kong stock exchange. Sin stocks
outperformed their market index in both Mainland China (5.94%) and Hong Kong (29.11%)
over the period from 1995 to 2007. The operating performances of these sin stock companies
were indifferent to other non-sin companies, both in Mainland China and Hong Kong.
44
3.20 Sin Stocks Revisited: Resolving the Sin Stock Anomaly
By David Blitz and Frank J. Fabozzi; Journal of Portfolio Management, Vol 44, Number 1,
2017, Pages 105-111
Various studies report that investing in “sin stocks”—firms that make money from
human vices such as alcohol, tobacco, gambling, and weapons—has historically delivered
significantly positive abnormal returns. This finding has inspired the hypothesis that sin
stocks are shunned to such an extent that they become systematically under-priced, enabling
investors who are willing to bear the reputation risk involved with investing in these stocks
to earn a return premium. In this article, the authors further investigate this notion, finding
that the performance of sin stocks can be fully explained by the two new quality factors in
the recently introduced Fama–French five-factor model, profitability and investment. Their
finding is robust over time and across different markets. In short, there is no evidence that
sin stocks provide a premium for reputation risk after controlling for their exposure to factors
in today’s asset pricing models.
3.21 Sin Stock Returns
By Frank J. Fabozzi, K.C. Ma and Becky J. Oliphant; Journal of Portfolio Management, Vol
35, Number 1, 2008, Pages 82-94
In this article, the authors examine the issue of how social values affect economic
values. Based on a small subset of the stock universe that has been generally associated with
sin-seeking activities, such as alcohol consumption, adult services, gaming, tobacco,
weapons, and biotech alterations, the authors find that a sin portfolio produced an annual
return of 19% over the study period, unambiguously outperforming common benchmarks in
terms of both magnitude and frequency. Several likely reasons for the positive excess returns
in sin stocks are identified. The authors argue that trustees or fiduciaries who develop
institutional investment policy statements should fully understand the economic
45
consequences of screening out stocks of companies that produce a product inconsistent with
their value systems. In addition, institutional investors should question if the cost to uphold
common social standards is worthwhile.
3.22 Is There a Cost to Faith-Based Investing: Evidence from FTSE Islamic
Indices
By Eric C Girard and M. Kabir Hassan; Journal of Investing Winter, Vol 17, No. 4, 2008,
Pages 112-121
In this study, they find no convincing performance differences between Islamic and
non-Islamic indexes from January 1999 to December 2006. Islamic indexes are growth and
small-cap oriented and conventional indices are relatively more value and mid-cap focused.
After controlling for market risk, size, book-to-market, momentum, and local and global
factors, we conclude that the difference in return between Islamic and conventional indices
is not significant. Their findings suggest that the difference in performance of Islamic indices
as compared to conventional indices is attributed to style differences between the two types
of series. The multivariate cointegration analysis suggests that both the Islamic and
conventional groups are integrated for the overall period. Overall, similar reward to risk and
diversification benefits exist for both types of indexes.
3.23 Is faith‐based investing rewarding? The case for Malaysian Islamic unit
trust funds
By M. Kabir Hassan, Abu Nahian Faisal Khan, Thiti Ngow; Journal of Islamic Accounting
and Business Research, Vol 1, Issue 2, 15 October 2010
The growing demand for alternative investment vehicle which adheres to sharia’s
principles has prompted other measures to boost the Islamic capital market. Unit trust funds
in Malaysia have been growing exponentially and their existence signifies the extent of
development in the Malaysian financial market. For foreign and domestic investors who
46
have low risk tolerance and wish to diversify, unit trust funds offer the opportunity to invest.
The increasing relevance of unit trust funds as an investment instrument has driven us to
analyse the fund's performance. This paper addresses these issues. The paper examines the
comparative performance of Malaysian unit trust funds vis‐à‐vis their non‐Islamic
counterparts using a variety of measures, such as Sharpe, Treynor, Jenson and Fama's
selectivity, net selectivity and diversification. The paper also examines the persistence of
performance using Carhart's four‐factor pricing models. Lastly, the paper employs an
analysis of cointegration to examine how the Islamic unit trust funds are related in long term
with their non‐Islamic counterparts, as well as their respective market portfolios. The paper
finds no convincing performance differences between Islamic and non‐Islamic Malaysian
unit trust funds. Controlling performance for style differences, the paper finds that non‐
Islamic unit trust funds in Malaysia are value‐focused while Islamic unit trust funds are small
cap oriented. In addition, similar reward to risk and diversification benefits exist only
between Islamic and non‐Islamic Malaysian unit trust funds. The study contributes to the
existing Islamic investment literature by pursuing an empirical analysis on the performance
of both Islamic and non‐Islamic Malaysian unit trust funds by using more recent data and
further investigating the long‐run relationship between Islamic and non‐Islamic unit trust
funds.
3.24 The Impact of Faith-Based Screens on Investment Performance
By Esmeralda O. Lyn and Edward J. Zychowicz; Journal of Investing, Vol 19, Issue 3, 2010,
Pages 136-143
There has been a phenomenal rise in faith-based investing in recent years. A very
important question arises: do investors sacrifice satisfactory economic returns by making
ethically and socially responsible investing decisions based on their faith? Using data on 36
faith-based mutual funds, this article reviews and extends previous research on the
performance of faith-based investing. It examines the performance of these faith-based funds
47
over three different five-year periods from May 2001 to February 2008. By applying a
comprehensive set of tests, the authors find evidence that faith-based funds mostly
outperform the market. The results also suggest that faith-based funds do better than socially
responsible investing funds in general.
3.25 Socially responsible, green, and faith-based investment strategies:
Screening activity matters!
By Kathrin Lesser, Felix Rößle, Christian Walkshäusl; Finance Research Letters, Vol 16,
February 2016, Pages 171-178
Analysing more than 200 internationally-investing sustainably screened funds, they
find that socially responsible, green, and faith-based investments have to be considered as
different approaches within the broader field of sustainable investing. While socially
responsible and green funds tend to underperform in non-crisis markets, faith-based funds
perform similar to the market and their conventional peers during any market state. They
provide evidence that the funds’ specific screening activity significantly impacts the
financial performance of sustainable investing vehicles in international markets. In
particular, social screens lead to the underperformance of socially responsible funds, while
energy screens drive the performance of green funds.
48
4. Data Analysis, Interpretation and Presentation
4.1 Primary Data
The Primary data was collected through the means of survey whose samples were
selected randomly. The data collected through the survey and its interpretation is as follows:
4.1.1 What is your name?
Through this question, we determine the sample size which at the end of the survey
came upto 50 people.
4.1.2. How old are you?
[Below 25, 25-40, 40-60, Above 60]
Sample Age Group
0%
42%
58%
Below 25
25-40
41-60
Above 60
Since the sampling for the study was done randomly, the results of ages of the
investors taking the survey was unexpected. Out of the 50 responses, 29 of the investors
(58%) were below the age of 25 and remaining 21 investors (42%) were within the range of
49
25 to 40 years old. This means that the analysis of the primary data would show a good
enough behaviour pattern of investors below the age of 40.
4.1.3. Are you aware of Socially Responsible Investments?
[Yes / No / Maybe]
Awareness on SRI
14%
28%
58%
Yes
No
Maybe
This question aimed at knowing the awareness of Socially Responsible form of
investing among the investors. Out of the 50 responses, majority of the investors i.e. 29
investors (58%) were clearly aware of such an investing strategy. Whereas 14 investors
(28%) were not completely aware of such an investment strategy. Perhaps it was their first
time hearing of such an investment. The remaining 7 investors (14%) were unsure about it.
It could be that they had heard of such a strategy before but were not completely sure of what
that entailed.
50
4.1.4. When thinking of investing your funds, how much does the ethical or social
responsibilities and actions of a company matter to you?
[5 point scale; 1 = Not at all, 5= It's the only thing that matters]
Importance of Ethical Nature Of A Company
40
38
35
30
25
20
15
10
5
7
0
5
0
1
2
3
0
1
2
3
4
4
5
5
This question was asked with the intention to find out how much does an investor
care about the ethical nature of a company and the ability of that company to follow through
with their social and environmental responsibilities. Majority of the investors i.e. 38
investors (76%) considered the ethical nature to be pretty important factor in their decision
making process but they did not think that it was the only thing that mattered in an
investment.
7 investors (14%) did infact think it was the only thing that mattered. For these
investors, the ethical nature of a company was the top priority in their investment decisions.
On the other hand, remaining 5 investors (10%) responded that while ethics and following
up on social responsibility matters, it was not something they thought deeply about during
their investments.
51
4.1.5. If provided with enough funds, would you invest in socially responsible
Investment funds?
[Yes / No / Maybe]
Preference For SRI Funds
28%
0%
72%
Yes
No
Maybe
This question was asked with the intention to find out the investors preference and
willingness to invest in Socially Responsible Funds if provided with enough funds. Majority
of the responses i.e. 36 investors (72%) responded positive. While the remaining 14 investors
(28%) were unsure about their decision. This shows that there is quite a lot of demand for
such type of funds and that majority of the investors care about funds that incorporate
companies that care about the society. Sure, 28% of the respondents weren’t completely
open to such a form of investment fund, they also weren’t completely opposed to it.
4.1.6. If provided with enough funds, would you invest in Green investing i.e.
Companies involved in conservation of natural resources, the production and discovery of
alternative energy sources, the implementation of clean air and water projects, or other
environmentally conscious business practices?
[Yes / No / Maybe]
52
Preference For Green Investments
14%
0%
86%
Yes
No
Maybe
This question was asked with the intention to find out the investors preference and
willingness to invest in Green Investment Strategy if provided with enough funds. Basically
investing in companies, or funds that incorporate companies, that are involved in making the
environment clean and finding new and better sources of energy that do no harm the
environment. As one would hopefully expect, Majority of the investors i.e. 43 respondents
(86%) responded with a huge wave of positivity. While the remaining 7 investors (14%)
were unsure about such an investment.
A response like that does not mean that they don’t care about the environment but
that they probably worry about getting lesser than average returns in such an investment
strategy, which is a fair thing to worry about since sectors like these tend to not perform too
well financially.
Still, again, they were just unsure about the decision. Not completely opposed to it.
4.1.7. If provided with enough funds, would you invest in Faith-based funds?
[Yes / No / Maybe]
53
Preference For Faith-based Funds
22%
28%
50%
Yes
No
Maybe
This question was asked with the intention to find out the investors preference and
willingness to invest in Faith-based Funds if provided with enough money to invest. Faithbased funds are basically those types of funds that strategize and build their portfolios based
on their own or their investors’ religious beliefs.
Half of the investors, and majority in this case, were completely opposed to the idea
of a fund based on religious beliefs. 25 out of 50 respondents (50%) said ‘No’ to this form
of investment, 14 investors (28%) were unsure about it and the remaining 11 investors (22%)
were completely on-board with this type of investment strategy.
There could be several reasons that could explain why the majority of the investors
reacted negatively to this idea of investment. They could be either atheists or might believe
that mixing financial decisions with religion was not a great idea. Ofcourse the lower rate of
financial returns could also be a reason as to why they wouldn’t want to invest in such form
of investment.
On the flip side, 22% of the sample pool considered such form of investment
profitable so it’s not like there’s no demand for such form of investment strategy.
54
4.1.8. If provided with enough funds, would you invest in Sin stocks i.e. a stock that is
a publicly traded company involved in or associated with an activity that is considered
unethical or immoral?
[Yes / No / Maybe]
Preference For Sin Stocks
0%
44%
56%
Yes
No
Maybe
This question was asked with the intention to find out the investors preference and
willingness to invest in Sin Stocks if provided with enough funds. These would be stocks of
companies that are involved in unethical forms of business or just those activities that go
against the investors’ moral beliefs.
The responses for this question was almost evenly split but went in the favour of the
side that would indeed invest in such stocks. 28 investors (56%) considered such stocks to
be quite profitable, whereas 22 investors (44%) would rather avoid investing in such a form
of investment.
The reason for positive responses is mostly because of stable financial returns since
companies that are involved in such activities are, and will always be, in high demand.
55
4.1.9. Do you think environmental and social responsibility should be thought of more
than higher returns?
[Yes / No / Maybe]
Preference of Social Responsibility Over High Returns
24%
56%
20%
Yes
No
Maybe
This question was asked to see if an investor would prefer the socially responsible
and ethical nature of a company over higher returns. Majority of the investors responded
with an ‘Yes’, meaning that 28 out of the 50 respondents (56%) would rather think of social
and ethical nature than higher returns. 10 investors (20%) within the collected sample though
would always place high returns on the priority over ethics. The remaining 12 investors
(24%) were unsure about how much they preferred socially responsible investments over
ones that gave higher returns.
The result does not mean that the 28 investors that responded ‘Yes’ did not care about
the financial returns, it simply means that they gave the ethical nature of a company slightly
more importance.
56
4.1.10. If presented with an opportunity to choose between two funds, which one would
you choose?
[An unethical company's fund with high returns or an ethical company's fund with
average to low returns]
Fund Preference
22%
78%
Ethical Company, Low / Moderate Returns
Unethical Company, High Returns
This questions was asked to the respondents with the hopes of finding out which type
of fund would they go for if given an option—An ethical company that followed through
with all their social and environmental responsibilities but gave a low or moderate return; or
an unethical company that dealt in sinful activities and did not follow their social
responsibilities but instead gave higher returns to the investors.
According to the survey, majority of the respondents i.e. 39 out of the 50 investors
(78%) would definitely invest their money in a company, or a fund, that’s ethical in its
dealings even if they gave returns that were either low or slightly less than market rate of
return. This proved that majority of the investors, if given an option, would choose an ethical
company or fund.
Ofcourse, if there’s light, there’s also darkness. The remaining 11 investors (22%)
responded that they did not care about the unethical nature of the companies as long as they
57
got returns that were higher than the market rate of returns. It’s not a wrong decision by any
means. It’s perfectly alright to think of and give importance to financial returns while
investing since that is the purpose of investments—to increase your wealth.
4.1.11. How easy and informative do you find the above survey?
[5 point scale; 1 = Complicated and unhelpful, 5 = Easy and informative]
Opinions on Survey
35
30
31
25
20
15
14
10
5
0
0
5
1
2
3
0
1
2
3
4
4
5
5
The intention behind this question was to find out whether the survey taken was
simple enough for a layman to understand, as well as, informative for things they might have
been aware of before.
Majority of the respondents i.e. 31 out of 50 (62%) thought that the survey was
extremely easy and informative. 14 respondents (28%) found it either less easy or less
informative. And lastly, 5 respondents (10%) had neutral opinions on it.
58
4.2 Secondary Data
4.2.1 Performance of ESG Funds
Performance of ESG Funds
90,00%
76,45%
80,00%
70,00%
62,42%
60,00%
50,00%
50,00%
40,00%
31,83%
27,42%
25,56%
30,00%
20,00%
10,00%
13,85%
0,00%
0,00%
0,00%
7,27%
4,71%
3,00%
2,65%
1,14%
3 Years
1 Year
6 Months
3 Months
0,00%
SBI Magnum Equity ESG
Axis ESG
ICICI Prudential ESG
Kotak ESG
Quantum India ESG
The above graph is formulated through the data collected in Table 1.
ESG funds are a very recent investment market that can even be classified as a Niche
market. As of current times, only 9 ESG funds are available in the market and a year ago
there was only one ESG fund—SBI Magnum Equity ESG Fund.
Due to this situation, the data financial data collected on these funds are scarce. But
even on a limited data, one can see that the returns on these investment funds is nothing to
scoff at. For a one year return, all the 3 available funds had a return of above 50%, the highest
being 76.45% by Quantum India ESG Fund.
Same with the 6-month returns where the range for returns is between 25-32%. And
in a three-month returns, the rates vary between 1-7%.
While these funds are relatively new and hence do not have huge data to back its
profitability, it wouldn’t be wrong to look at the above data and consider these funds to be
fairly profitable investments.
59
4.2.2 Performance of Green Stocks
Performance of Green Stocks
₹ 1 400
₹ 1 298
₹ 1 227
₹ 1 177
₹ 1 107
₹ 1 200
₹ 1 000
₹ 852
₹ 800
₹ 537
522
₹ 600
₹ 485
₹ 419
₹ 400
₹ 200
₹
₹ 66
42
₹
₹ 69
42
₹
₹ 72
44
Jan
Feb
March
₹0
Ion Exhange
Inox Wind
Websol Energy Systems Ltd.
Avanti Feeds Ltd.
Adani Enterprises Ltd.
The above graph is formulated through the data collected in Table 2.
Share prices of Green stocks vary a lot, from it being as low as Rs.42 to Rs.1177.
What can be depended upon is the consistent growth rates of these share prices. Except for
Avanti Feeds Ltd, who seems to have had a rough quarter; all the other four companies
chosen randomly show a consistent growth rate. Especially Adani Enterprises Ltd. who shot
from Rs.537 to Rs.1107 in just 3 months.
Environmental or green stocks have a stigma of being low return investments but
from the above graph and the data it visualizes, it’s safe to say that Green investments have
a profitable angle to them as well.
Sure it might not be huge returns but they’re safe and consistent. Not to mention the
ethical and environmental benefits that goes along with such investments.
60
4.2.3 Performance of Faith-based Funds
Performance of Faith-based Funds
80,00%
68,75%
64,27%
59,34%
70,00%
60,00%
50,00%
40,00%
30,28%
30,00%
20,00%
22,29%
22,26%
15,82%
15,04%
13,88%
5,53%
4,97%
4,48%
10,00%
0,00%
3 Years
Tata Ethical Fund
1 Year
6 Months
Taurus Ethical Fund
3 Months
Nippon India ETF Shariah BeS
The above graph is formulated through the data collected in Table 3.
Not unlike ESG Funds, Faith-based funds are very limited and recent in India. Infact
they’re so niche that there are only three faith-based funds available for investments. This
again brings the issue of accuracy and the reliability of this data.
Nevertheless, it does seem like this form of investment do bear profitable
investments.
All three funds provide near 15% 3-year rate of return. As for the 1-year rate of
returns, it ranges from 59-69%, which is a great return rate. Its 6 month rates vary from 2230% and its 3 month rates are near 5%.
From the primary data collected through survey, it seemed that majority of the
investors were against investing in Faith-based funds. But despite their hesitation to invest
in such funds, the data suggests that these funds are indeed quite profitable in nature.
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4.2.4 Performance of Sin Stocks
Performance of Sin Stocks
$100,00
$90,00
$80,00
$70,00
$60,00
$50,00
$40,00
$30,00
$20,00
$10,00
$-
$79,06
$64,19
$84,95
$68,54
$88,06
$74,87
$49,50
$48,48
$46,21
$51,82
$49,90
$44,85
$52,51
$51,90
$50,55
Jan
Feb
March
Molson Coors Beverage Co.
Philip Morris International Inc.
GrowGeneration Corp.
Coco-Cola Co.
Tyson Foods Inc.
The above graph is formulated through the data collected in Table 4.
The categorization of Sin stocks as Sinful varies a lot based on personal moral and
religious beliefs as well as cultural beliefs. One might consider liquor and tobacco to be
sinful business but not junk food or oil and gas energy. On the other hand, one might consider
junk food industry or meat industry to be sinful but not the liquor industry.
Bearing that in mind, I have taken 5 stocks from different industries that fall under
some or the other’s definition of Sinful. And from the above data, one can easily see the
profitability aspect of it.
Each and every stock has been on a constant rising growth for the past 3 months.
Even the share price of Molson Coors Beverages, despite falling in February a little, came
back up in the following month.
This shows that while people might be against such sinful stocks, these businesses
do carry a lot of demand behind them. And that demand increases their share price, which
obviously makes them a very enticing investment atleast financially.
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4.2.5 Comparison of Performance of ESG Funds against Traditional Funds
Performance of Non-ESG Funds
90,00%
76,57%
80,00%
62,44%
58,23%
55,00%
46,28%
70,00%
60,00%
50,00%
40,00%
30,00%
20,00%
26,47%
25,33%
24,81%
24,31%
23,21%
21,11%
16,17%
16,03%
12,68%
11,40%
11,35%
5,16%
4,41%
3,54%
1,23%
10,00%
0,00%
3 Years
1 Year
6 Months
3 Months
Axis Flexi Cap Fund
Invesco India Growth Opportunities Fund
Canara Roboco Flexi Cap Fund
Kotak Flexicap Fund
Parag Parikh Flexi Cap Fund
The above graph is formulated through the data collected in Table 5.
Comparing the above graph with the one that shows the performance of ESG funds,
we can try to see how profitable these funds are based on their performance.
ESG funds do fall under a disadvantage here since these funds are relatively new and
hence less data compared to Non-ESG funds.
But on a first glance, it does seem that the difference between these two categories
of fund isn’t that great. Except in terms of 3-year rate of returns.
Both of these funds range between 50-75% 1-year rates of returns; both fall under
the range of 25-30% 6-months rate of return and both of these categories have a range of 210% 3-month rate of return. The non-ESG funds gain an edge in 3-year rate of returns where
it goes beyond the 14%.
Still, on a short term investment period, there’s a minimal difference between these
two categories of funds.
63
5. Conclusion
5.1 Major Findings
The hypothesis that we made at the start of the study will now be tested upon by the
use of primary and secondary data collected.
1. H1 = More than half of the investors are aware of SRI
H0 = Less than half of the investors are aware of SRI
The results of survey question no. 3 would be used to test this hypothesis. The
question asked about the awareness of the investors regarding socially responsible form of
investments.
Considering that 58% of the respondents were aware of such a form of investment
strategy, the hypothesis H1 stands true here.
2. H1 = More than half of the investors think Ethical and Socially Responsible
Companies is an important decision making factor
H0 = Less than half of the investors think Ethical and Socially Responsible
Companies is an important decision making factor
The results of survey question no. 4 & 9 would be used to test this hypothesis. The
4th question asked that, on a scale of 1 to 5 where 1 meant ‘Not important at all’ and 5 meant
‘It’s the only thing that matters’, how important of a role did the social and ethical activities
of a company play in their decision making process regarding investments. Whereas the 9th
question asked if the investors would choose ethical nature of a company over higher returns.
Majority of the investors believed that it was a very important part of their decision,
some even went as far as to say that it was the only thing that mattered. Even in the results
of the 9th question, 56% of the investors preferred ethical nature over higher returns. While
64
20% of the investors responded that they chose and valued high rate of returns more, it still
wasn’t a majority opinion.
Considering that, Hypothesis H1 stands true here too.
3. H1 = More than half of the investors would invest in SRI funds
H0 = Less than half of the investors would invest in SRI funds
The results of survey question no. 5 would be used to test this hypothesis. The
question asked about the investor’s willingness to invest in Socially Responsible Funds if
provided with enough funds.
72% of the sample size responded with ‘Yes’ and those who did not, they responded
with a ‘Maybe’ meaning that they weren’t completely opposed to the idea. In such a case,
H1 proves to be true.
4. H1 = More than half of the investors would choose Green Investing
H0 = Less than half of the investors would choose Green Investing
The results of survey question no. 6 would be used to test this hypothesis. The
question asked about the investor’s willingness to invest in Green investing techniques if
provided with enough funds.
According to the survey taken, 86% of the investors are to open to such a form of
investment technique. And the ones who weren’t open to the idea, responded with a ‘maybe’
signifying that they aren’t opposed to such an investment technique too. The results prove
that the hypothesis H1 is true.
65
5. H1 = More than half of the investors would invest in Faith-based funds
H0 = Less than half of the investors would invest in Faith-based funds
The results of survey question no. 7 would be used to test this hypothesis. The
question asked about the investor’s willingness to invest in Faith-based Funds if provided
with enough money.
50% of the investors responded with a clear ‘No’ and 22% of the investors responded
with a clear ‘Yes’, while the remaining 28% were indecisive. Depending on what they
decision the take, either the ‘No’ side would increase or the ‘Yes’ side. But for now, clearly
the majority of investors would rather avoid investing in Faith-based funds. This would mean
that the hypothesis H0 is the one that stands true here.
6. H1 = Less than half of the investors would invest in Sin Stocks
H0 = More than half of the investors would invest in Sin Stocks
The results of survey question no. 8 would be used to test this hypothesis. The
question asked about the investor’s willingness to invest in Sin Stocks if provided with
enough funds. Sin stocks basically mean stocks of those companies that indulge in socially,
religiously or morally sinful activities like liquor, tobacco, pornography or prostitution,
gambling, etc.
56% of the survey respondents said that they were completely fine with investing
their funds in such stocks and it didn’t matter to them. Whereas 44% of the respondents were
clearly against investing their funds in such type of companies. This proves that the
hypothesis H0 stands true in this scenario.
66
7. H1 = More than half of the investors would choose Ethical and Socially Responsible
funds over high-return funds
H0 = Less than half of the investors would choose Ethical and Socially Responsible
funds over high-return funds
The results of survey question no. 10 would be used to test this hypothesis. The
question asked the investors to choose from two types of fund—an ethical fund with low or
moderate return; or an unethical fund with high returns.
According to the survey, 78% of the investors who took the survey would go for a
fund that offered a low or moderate return as long as it was ethical and socially responsible.
The survey proves that the hypothesis H1 stands true.
8. H1 = If given an option, investors would choose an ethical fund with low returns
H0 = If given an option, investors would choose a sinful stock fund with high returns
The results of survey question no. 2 would be used to test this hypothesis. The
question asked about
9. H1 = SRI funds are profitable investments
H0 = SRI funds are not profitable investments
According to the secondary data collected and the analysis of the financial
performances of these form of investment strategy, SRI funds seem like profitable form of
investments.
Hence, considering the analysis done above and through the data collected, the
hypothesis H1 stands to be proven true.
67
10. H1 = SRI funds are more profitable than traditional funds
H0 = SRI funds are not more profitable than traditional funds
Through the analysis done in the 4.2.5, there is a minimal difference between the two
categories of funds. Atleast in a short term period of one year and less, the rates of return are
fairly the same. The only difference that stands out is on a long term basis where the nonSRI funds offer a higher rate of return than those offered by SRI funds.
As such, the hypothesis H0 stands to be true but by just a margin and through also a
lack of data on SRI Funds.
5.2 Suggestions
One of the suggestions that I could give is on how to be a socially responsible
investor.

Know the difference between traditional and responsible investing. The
difference might be in returns that you get from your investments. The returns
from socially responsible investing may differ a little from the traditional one
as you might be leaving behind a lot of high return investment options.
However, always remember the reason why you have opted for this way of
investing.

Do your research and make sure the companies or the fund you invest in
comply with the ESG criteria or even your own personal moral and ethical
code of standards.

Use your influence as a shareholder. Shareholders not only invest in
companies that align with their values but they also use their position to
68
influence the actions of the company in which they own stock. Investors do
this by filing a shareholder resolution.

Invest in companies that help the community to grow and develop in a good
way. This is usually done in low-income areas where the investment is used
to provide loans to people and small-business owners who would otherwise
have trouble getting approved for a loan. Community investments also
support ‘green companies’ that have a large carbon footprint on the
environment.

Socially responsible investing is still in the early adoption phase. By making
the right investment choices, you can make a real positive impact on the
community- along with building wealth. Moreover, sooner or later, social
consciousness will become the selling point for global companies. And you,
being a part of it, can lead the movement.
5.3 Conclusion
Socially responsible form of investing strategy is a very new form of investment that
carries a lot of stigma with it. From the research done, it seems the investors are willing to
invest in SRI funds and want to give more preference to ethical nature of the companies over
the financial return perspective of them.
Following are the conclusions drawn from the research and analysis done throughout
this paper.
5.3.1 Challenges of SRI in India

Lack of quality data
Accurate data about a company’s environmental, social or governance
performance is usually procured from an analyst, a fund manager or an
69
investor. There are also other sources of acquiring this data such as an
organisation’s sustainability report and annual report, media, information
available through public sources such as news articles. This process often
tends to tedious, complicated and inaccurate. Hence, issues such as accuracy,
reliability and data credibility continue to be an obstacle in expanding ESG
investments in India.

Lack of market standards
There is a lack of market standardisation when it comes to naming ESG
investing. It’s called by various names- impact investing, socially responsible
investing, sustainable and responsible investing. There is also a lack of
standardisation in ESG data collection, impact measurement standards and
reporting methodology. This adds to another level of complexity for
investors.

Conventional mind-set
A lot of investors and asset managers consider ESG to be an added expense,
which could be done away with. This lack of vision restrains the growth of
ESG investing in India.

Lack of track record of ESG funds
Most of the ESG funds have come up recently, in the last 2-3 years. Hence,
India does not have a long track record of ESG-aligned funds which does not
attract as much investment.

Lack of advocacy
While ESG investing is gradually becoming popular with the companies,
there’s still not enough advocacy about this issue, especially in India. It is
essential to make investors more aware of the benefits of ESG investing.
70
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Appendix
Table 1: Performance of ESG Funds
Fund
13.85%
0.00%
0.00%
0.00%
0.00%
62.42%
50.00%
76.45%
0.00%
0.00%
6
Months
25.56%
27.42%
31.83%
0.00%
0.00%
Jan
₹ 1,177
₹ 66
₹ 537
₹ 42
₹ 522
Feb
₹ 1,227
₹ 69
₹ 852
₹ 42
₹ 485
March
₹ 1,298
₹ 72
₹ 1,107
₹ 44
₹ 419
3 Years
SBI Magnum Equity ESG
Axis ESG
Quantum India ESG
ICICI Prudential ESG
Kotak ESG
1 Year
3
Months
2.65%
1.14%
7.27%
3.00%
4.71%
Table 2: Performance of Green Stocks
Company
Ion Exchange
Inox Wind
Adani Enterprises Ltd.
Websol Energy Systems Ltd.
Avanti Feeds Ltd.
Table 3: Performance of Faith-based Funds
Fund
Tata Ethical Fund
Taurus Ethical Fund
Nippon India ETF Shariah BeS
3 Years
13.88%
15.04%
15.82%
1 Year
64.27%
59.34%
68.75%
6
Months
30.28%
22.26%
22.29%
3
Months
4.48%
5.53%
4.97%
Table 4: Performance of Sin Stocks
Company
Molson Coors Beverage Co.
Philip Morris International Inc.
GrowGeneration Corp.
Coco-Cola Co.
Tyson Foods Inc.
Jan
$
49.50
$
79.06
$
46.21
$
48.48
$
64.19
Feb
$
44.85
$
84.95
$
51.82
$
49.90
$
68.54
March
$
51.90
$
88.06
$
50.55
$
52.51
$
74.87
72
Table 5: Comparison of Performance of ESG Funds against Traditional Funds
Fund
Axis Flexi Cap Fund
Invesco India Growth Opportunities Fund
Canara Roboco Flexi Cap Fund
Kotak Flexicap Fund
Parag Parikh Flexi Cap Fund
3 Years
16.17%
11.40%
16.03%
12.68%
21.11%
1 Year
46.28%
55.00%
58.23%
62.44%
76.57%
6
Months
24.81%
23.21%
24.31%
26.47%
25.33%
3
Months
1.23%
3.54%
4.41%
5.16%
11.35%
73