Paz Méndez-Rodríguez

Synthetic indicators of mutual funds’ environmental responsibility: An application of the Reference Point Method

Socially Responsible Investing (SRI) is broadly defined as an investment process that integrates not only financial but also social, environmental, and ethical (SEE) considerations into investment decision making. SRI has grown rapidly around the world in the last decades. In the last years, given the causes of the 2008 financial crisis, ethical, social, environmental and governance concerns have become even more relevant investment decision criteria. However, while a diverse set of models have been developed to support investment decision-making based on financial criteria, models including also social responsibility criteria are rather scarce.

Social Performance and Financial Performance: A Controversial Relationship

Different factors explaining divergent results on the relationship between corporate Social Performance (SP) and Financial Performance (FP) can be found in the academic literature. The main objective of this chapter is to test the impact of these factors on these divergent results. It also aims to assess the intensity of the sensitivity of this relationship to these factors considered individually or in combination. The results of our experimental research show that the estimated relationship depends on the methodological choice. More specifically, the relationship varies according to the measurement of the SP, the measurement of FP and the chosen sample. This relationship is neither stable nor necessarily linear, as many relevant academic works in the literature assume. This work concentrates on the knowledge gained from this literature and suggests lines of reflection to better understand the studied relationship in a field which is still evolving.

Measuring Social Responsibility: A Multicriteria Approach

In this chapter we present a portfolio selection model for Socially Responsible Investment. The model, following the spirit of Socially Responsible Investment, consists of two different steps. Firstly, a social screening is applied in order to obtain the feasible set of assets accomplishing the socially responsible investment policy of the assets’ manager. In this step, an indicator is obtained for the measurement of the social responsibility degree of an asset. Assets are then ranked using this indicator from the most socially responsible to the less socially responsible. In a second step, once the feasible set is obtained, composed of those socially responsible assets verifying the screens and standards imposed by the assets’ manager, a portfolio selection model is proposed based on the classical Markowitz mean-variance model to determine efficient portfolios.

Contextual determinants of induced abortion: a panel analysis

ABSTRACT OBJECTIVE Analyze the contextual and individual characteristics that explain the differences in the induced abortion rate, temporally and territorially. METHODS We conducted an econometric analysis with panel data of the influence of public investment in health and per capita income on induced abortion as well as a measurement of the effect of social and economic factors related to the labor market and reproduction: female employment, immigration, adolescent fertility and marriage rate. The empirical exercise was conducted with a sample of 22 countries in Europe for the 2001-2009 period. RESULTS The great territorial variability of induced abortion was the result of contextual and individual socioeconomic factors. Higher levels of national income and investments in public health reduce its incidence. The following sociodemographic characteristics were also significant regressors of induced abortion: female employment, civil status, migration, and adolescent fertility. CONCLUSIONS Induced abortion responds to sociodemographic patterns, in which the characteristics of each country are essential. The individual and contextual socioeconomic inequalities impact significantly on its incidence. Further research on the relationship between economic growth, labor market, institutions and social norms is required to better understand its transnational variability and to reduce its incidence.

Corporate social responsibility, stock salience, and the asymmetric market impact of consumer sentiment news on Spanish firms

Purpose - – The purpose of this paper is to identify whether the Spanish stock market experiences a negativity effect on the announcement of Spanish consumer sentiment information and if firms that are signatory to the UN Global Compact on corporate social responsibility are relatively more salient in the minds of investors. Design/methodology/approach - – The authors use consumer sentiment announcements to show how the negativity effects on the Spanish stock market are significantly influenced by how salient the stock is in the minds of investors. If a firm’s stock exhibits negativity effects on the release of consumer sentiment information then this stock is salient to investors. If firms who are signatory to the UN Global Compact exhibit significant negativity effects, it could be concluded that these stocks are salient, particularly if firms that are not signatory to the Global Compact do not exhibit a similar negativity effect. Findings - – The IBEX35 index experiences significant negativity effects upon the release of Spanish consumer sentiment announcements. This is similar to that reported in other countries, notably Australia and the USA. Using the constituent firms in the IBEX35 index, the authors find that those firms that are signatory to the UN Global Compact are significantly more likely to experience negativity effects upon the release of Spanish consumer sentiment information than if they are not signatory to the Global Compact. This indicates that firms that are part of the UN Global Compact are more salient to investors. Research limitations/implications - – Available published Spanish data on consumer sentiment. Practical implications - – Little is understood of the impact that consumer sentiment announcements have on stock prices. Studies in USA and Australia have identified significant negativity effects in stock markets when consumer sentiment information is released. This research has found that a psychological negativity bias occurs in firms that are salient to investors. Salience has been found to be important in asset pricing. Originality/value - – This paper tries to find out which companies are more likely to sign the UN Global Compact. These companies are more sensitive to consumer sentiment, because they depend on the everyday decisions of the consumers. The more the companies depend on consumers, the more they care about them. And, when the consumer sentiment goes down, they are more affected by this sentiment. These firms are also more worried about the long term. They are not only thinking about the profits in the short term but also about maintaining the generation of profits in the long term.

Mutual Funds’ Socially Responsible Portfolio Selection with Fuzzy Data

Socially Responsible Investing (SRI) corresponds to an investment practice that takes into account not only the usual return-risk criteria, but also other non-financial dimensions, namely in terms of environmental, social and governance concerns. However, while a diverse set of models has been developed to support investment decision-making based on classical financial criteria, models including also a socially responsible dimension are rather scarce. In this chapter we present a multicriteria portfolio selection model for mutual funds based on the Reference Point Method which takes into account both a financial and a non-financial dimension. The latter is usually characterized by the imprecise, ambiguous and/or uncertain nature of decision making criteria. This is why fuzzy methodology is used to model social responsibility. The proposed model is intended to be an individual investment decision making tool for mutual funds’ portfolio selection, taking into account the subjective and individual preferences of an individual investor under two different scenarios: a low social responsibility degree and a high social responsibility degree scenario. In order to illustrate the suitability and applicability of the investment decision making model proposed, an empirical study on a set of US domiciled equity mutual funds is carried out.

Ranking Socially Responsible Mutual Funds Based on the Particular Preferences of the Decision Maker

Several methods for ranking mutual funds based on financial performance have been developed, but few of them propose a ranking methodology based on their non-financial performance. The aim of this chapter is to present two ranking methods for mutual funds based on their socially responsible performance. The ranking approaches suggested can be understood as complement financial information which can help socially responsible mutual fund managers, individual and institutional investors in their portfolio selection process. Both methods use multiple criteria decision analysis (MCDA) techniques, namely, one is based on AHP (Analytic Hierarchy Process) and the other one apply MACBETH (Measuring Attractiveness by a Categorical Based Evaluation Technique). The results reveal that an integrated framework using multiple criteria decision analysis (MCDA) techniques could help the investor in selecting a suitable socially responsible mutual funds portfolio, because the consideration of several criteria reflect more precisely the multiple dimensions of this decision making problem.

Portfolio Selection with SRI Synthetic Indicators: A Reference Point Method Approach

In this chapter we present an individual investment decision making tool for stocks’ portfolio selection taking into account the subjective and individual preferences about different financial and socially responsible features of a particular investor. In order to do so, the first problem to be solved is the measurement of the degree of social responsibility of a financial asset. In this work we use a double reference point scheme to obtain synthetic indicators of the social responsibility degree of stocks. Then, a mixed reference point classification scheme is used to solve the resulting multiple criteria portfolio selection model including, together with the classical financial criteria, a social responsibility criterion based on the synthetic social indicators previously obtained. In order to illustrate the suitability and applicability of the proposed investment decision making model, an empirical study on a set of Spanish domiciled stocks is presented.

Profiling Ethical Investors

In the previous chapter we highlighted the important growth experienced by SRI especially remarkable after the 2008 financial crisis. In this context of growth it is important to know the profile of the important emerging group of investors willing to invest with social responsibility criteria, especially in countries like Spain, where this kind of investment is still marginal compared with countries like Australia which has a long SRI tradition. This chapter presents the results from a study designed to examine financial preferences, social, environmental, governance and ethical concerns and, socio-demographic characteristics and motivation of socially responsible investors. Based on an international online survey we analyse the degree of influence of a number of socio-demographic variables on the propensity for being a socially responsible investor. The study can be of great value for marketing researchers, institutional investors and fund managers attempting to identify those investors more receptive to SRI products. The information can also be used by advertising researchers to develop effective advertising campaigns.

Measurement of Assets’ Social Responsibility Degree

As we have seen in Chap. 3, one of the critical issues in SRI analysis is how to measure social responsibility levels of financial assets. Frequently, there is available disaggregated information on SRI strengths and concerns of assets from each socially responsible criterion. This information is usually provided by independent institutions like rating agencies. Most of the times the available data are presented in a disaggregated way and the individual investor has not got an aggregated indicator of the Social Responsibility Degree (SRD) of each asset. This indicator can be constructed in a subjective or objective way depending on the needs of each investor. In this chapter, we review the current practice and the most widely used methods in the academic literature mainly based on subjective approaches. In these approaches the aggregation weights depend on opinions and preferences of particular analysts, fund managers or investors.