Socially responsible mutual funds : the impact of fund governance on performance and attractiveness

This study provides a review of the development and a state of the art of the Socially Responsible Investing fund industry in Europe pointing out the new trends. It presents the different initiatives taken by the European governments as well as by the European Union to foster the SRI fund industry development. Does a better Socially Responsible Investing fund governance, through transparency policy, fund SRI specialization, and shareholder activism policy, have a positive effect both on the fund performance and on its attractiveness from the point of view of the investors or does it have a mixed effect with some criteria harming the fund performance and/or attractiveness? This paper investigates these hypotheses for European SRI mutual fund. The disclosure of SRI portfolio selection process reduces the fund performance; the shareholder activism impact is ambiguous while the presence of a SRI in-house research team increases the fund performance. I also find that the disclosure tend to increase both systematical risk and total risk while the shareholder activism tend on the whole to reduce both risks. Finally I find evidence that a greater transparency and shareholder activism increase the fund attractiveness.