Socially Responsible Investment and its impact on companies - Are companies having access to Socially Responsible Investment advantaged compared to ineligible companies?

Details

Supervisors

Knaepen, Denis

Faculty

Louvain School of Management

Degree label

Master [120] en ingénieur de gestion

Abstract

Today, socially responsible investments (SRI) is defined as “an investment discipline that considers environmental, social and corporate governance (ESG) criteria to generate long-term competitive financial returns and positive societal impact.” (US SIF, 2019). Over the last few years, the importance of SRI has skyrocketed such as in 2018, one in four US dollars under professional management in the US is involved in sustainable and responsible investing (US SIF, 2018). Companies have to pass a screening phase, composed of positive and negative criteria in order to have access to SRI. The main goal of SRI is to have a positive societal impact. Therefore, this thesis tried to answer the following research question: “Are companies having access to Socially Responsible Investment, benefiting companies, positively affected and on the contrary, ineligible companies are disadvantaged by the rise of SRI?”. In order to answer it, five sub-hypotheses have been designed based on five variables (Weighted Average Cost of Capital, R&D expense, Share price, Debt-to-Equity ratio and Revenue). In order to verify these sub-hypotheses, for each industry (technology, health care and consumer goods and service industry) ten benefiting companies and ten ineligibles companies have been selected. Then, five analyses have been conducted (an individual and an industry analysis, a comparison within industry, a global comparison within industry and a global comparison). Overall, the global comparison within industry, the most accurate analysis, resulted in three main conclusions. First, for the technology industry, companies having access to Socially Responsible Investment, benefiting companies, are advantaged compared to ineligible companies. Second, for the health care industry, companies having access to Socially Responsible Investment, benefiting companies, are neither advantaged nor disadvantaged compared to ineligible companies. Third, for the consumer goods/services industry, companies having access to Socially Responsible Investment, benefiting companies, are slightly advantaged compared to ineligible companies. As a result, the research question, is positively answered for the technology and the consumer goods and services industry and negatively answered for the health care industry.