Green innovation investments have rapidly grown since 2000. Green innovation indexes play important roles and are typically constructed by screening and indexing. However, Nobel Laureate Markowitz emphasizes portfolio selection instead of security selection and accentuates that “A good portfolio is more than a long list of good stocks.” Moreover, the screening-indexing strategies ignore that investors can take green innovation as an additional objective and thus gain additional utility. We consequently construct 3-objective portfolio selection for green innovation in addition to variance (...) and expected return. An efficient frontier of portfolio selection then extends to an efficient surface which is a panorama of the optimal variance, expected return, and expected green innovation. Investors thus fully envisage the trade-offs and enjoy the freedom of choosing preferred portfolios on the surface. In contrast, the screening-indexing strategies inflexibly leave investors with only one point. As the originality, we prove in a theorem that there typically exists a curve on the efficient surface so all portfolios on the curve dominate the green innovation index. We test the dominance by component stocks of China Securities Index 300 and obtain affirmative results out of sample. The results still hold in robustness tests. At last, we classify green innovation into categories, further model the categories by general k -objective portfolio selection, and still illustrate the dominance. Consequently, investors can consider and control each category. (shrink)

This paper presents a comprehensive analysis of socially responsible funds in Sweden by assessing fund managers' abilities and performances across different market states. These issues are analyzed at the aggregate and individual fund levels. The paper also presents several new statistical tests that allow more precise inferences about differences in performance and the variability in fund returns arising from different benchmarks. In general, SR and conventional funds perform similarly to the market. At the aggregate level, SR funds investing in Sweden (...) and Europe perform similarly to conventional funds, while those investing globally tend to underperform. This underperformance seems to be linked with poor selectivity abilities of global SR fund managers. For individual funds, the performance of both types of funds is more similar. Most funds perform similarly in crisis periods compared to non-crisis periods. Overall, our results are consistent with a mature market for SR investing and support the view that the similar performance of SR and conventional funds is associated with the mainstreaming of SR investment in Sweden. These findings encourage SR investing both by socially conscious investors, who wish to align their social values with their investment decisions, as well as by conventional investors, who will not be penalized by investing in these funds. We also call attention to the difficulties investors face when trying to identify funds with high social standards, considering that there is scarce information on the extent to which each fund holds stocks that comply with ethical and social criteria. (shrink)

It is widely claimed that climate change has increased the magnitude and the frequency of natural phenomena such as storms, droughts, and floods with the concomitant costs in terms of damages and victims. This paper using weekly data from global stock market indices in a Fama–French model, examines how and to what extent market agents and investors react to such events. As a yardstick for comparison purposes, the possible market impact of industrial accidents is also incorporated and examined in the (...) empirical investigation. The study uses in a comparative approach the STOXX Global ESG Environmental Leaders index and the STOXX Global index diversified across 1800 top companies. Results reported herein seem to indicate that natural and anthropogenic adversity have no immediate impact on the stock indices, while wildfires have an immediate reduction impact on market risk in the case of the ESG Environmental Leaders index. Moreover, wildfires and industrial accidents appear to cause a significant reduction of systematic risk over the next week following the incident. However, the magnitude of the effect is higher in the case of the ESG Environmental Leaders stock index. Finally, the effect on systematic risk by industrial accidents is temporarily without any lasting imprint. (shrink)

Business Ethics: A European Review, EarlyView.