05 Oct 2012
Using 10 years of privately compiled data, three leading academics have tied positive market performance to corporate social responsibility (CSR) activities at major publicly traded U.S. companies. Their research has netted them the Moskowitz Prize for Socially Responsible Investing, the only global prize recognizing outstanding quantitative research in the field of sustainable, responsible, impact (SRI) investing.
Elroy Dimson, Leverhulme Emeritus Fellow at London Business School, said “There is an increasing focus on Responsible Investing, especially among large institutions. For major investors, engagement is an important part of their strategy, and it is important to understand its impact. We are honoured to have our research on this topic recognised by this prestigious award".
Pietra Rivoli, deputy dean and professor, McDonough School of Business at Georgetown University and a longtime Moskowitz judge, presented the 2012 Moskowitz prize to the winners last night at the 23rd SRI Conference. Along with Professor Dimson were winners Oguzhan Karakas, assistant professor, Carroll School of Management, Boston College; and Xi Li, assistant professor, Fox School of Business, Temple University. All three winners are PhD alumni from London Business School.
Dimson, Karakas, and Li examined highly intensive shareholder engagements on environmental, social, and governance issues from 1999 to 2009. Their findings suggest that CSR engagement creates shareholder value, consistent but in a different scale compared with traditional shareholder activism or hedge fund activism.
The winning paper, "Active Ownership," shows that the average one-year abnormal return (also known as the excess or "alpha" return) after initial engagement is 1.8 percent — between the excess return of 4.4 percent for successful CSR investor engagements with U.S. companies, and zero for unsuccessful ones.
The positive returns documented were most pronounced for engagements on the themes of corporate governance and climate change. Firms with more reputational concerns and higher capacity to implement CSR changes were found more likely to be engaged, and experienced greater success in achieving the engagement objectives. Targeted firms experienced improvements in operating performance, profitability, efficiency, and governance indices after successful engagements. The paper's findings provide new evidence on the value of shareholder activism on CSR issues.
The Moskowitz Prize encourages and recognizes outstanding academic research on matters germane to the field of responsible investing. The $5,000 Moskowitz Prize is named for Milton Moskowitz, one of the first investigators to publish comparisons of the financial performance of screened and unscreened portfolios. It is awarded to the best academic paper of the year in this important area.
Since its inception in 1996, the Moskowitz Prize has been awarded annually at the SRI Conference, the largest and longest running conference serving investors and investment professionals in the sustainable, responsible, impact (SRI) investment industry in North America. The Moskowitz Prize is managed by the Berkeley-Haas Center for Responsible Business.
About The SRI Conference
The SRI Conference (http://www.SRIconference.com) is the premier forum for investors and investment professionals engaged in the sustainable, responsible, impact (SRI) investment industry. The SRI Conference is produced by First Affirmative Financial Network (http://www.firstaffirmative.com).