Ranking socially responsible mutual funds

Abstract

Socially Responsible Investing (SRI), also known as sustainable or ethical investing, 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. Recently, given the causes of the 2008 financial crisis, these concerns became even more relevant. However, while a diverse set of models have been developed to support investment decision-making based on financial criteria, models including also socially responsible criteria are rather scarce. The main objective of this paper is to contribute to try fulfilling this gap on the financial literature, suggesting a Multicriteria Decision Making tool which allows individual investors to analyze and rank socially responsible mutual funds based on their environmental, social and governance performance and taking into account the individual, subjective, personal preferences of each investor.