The Performance of Socially Responsible Investments : Are Swedish mutual funds forced to pay a price for doing good?

The financial performance of Socially Responsible Investing (SRI) strategies is heavily debated in the modern age. Due to lack of evidence on Swedish SRI performance, Swedish investors are uncertain about placing their financial assets in these strategies as they are afraid expected to sacrifice their financial return for doing good. The purpose of this study is to examine and evaluate the financial and risk-adjusted performance of Swedish registered SRI mutual equity funds compared to conventional mutual equity funds during 2010-2020. The study’s dataset consists of a total of 236 mutual equity funds, with a sample of 133 SRI funds and 103 conventional funds. Financial performance measures used in this study are alpha, estimated through the Carhart four-factor model, and the Sharpe Ratio. The analysis between SRI mutual equity funds and conventional mutual equity funds indicated an insignificant difference in both financial and risk-adjusted performance. Based on the evidence provided, the study concludes that Swedish investors who put ethical, environmental and social values into their investment decision making process do not have to sacrifice their expected financial return, nor will their investment entail a higher degree of risk