GLOBAL - There is still no evidence that ‘socially responsible investing’ (SRI) funds create financial value, according to research from the EDHEC-Risk Institute.

Its latest position paper, EDHEC found that a majority of the funds studied - over both long and short periods - produced negative alpha, albeit to a small degree.

What is more, the instthe financial crisis has increased the risks borne by SRI funds considerably, the institute found, concluding that SRI funds, on average, provide no protection from market downturns.

And yet an increasing number of European pension funds - as Olivier Bonnet, responsible for SRI issues at the French civil servant pension fund ERAFP, has pointed out - are requiring managers to disclose their approach to environmental, social and governance (ESG) and be a signatory to the UN’s Principles for Responsible Investment.

He said: “The Pensions Intelligence White Paper found that nearly two-thirds of funds surveyed have an ESG policy in place, and that, in 2010, 17% of requests for proposals asked whether managers were PRI signatories.”

The study examined SRI funds over an eight-year period - with the data ending in December 2009 - and a three-year period, which included data from January 2007 to 2009.

It followed in the footsteps of an earlier EDHEC study in 2008, which concluded that none of the funds in the sample of SRI funds produced both positive and statistically significant alpha over the six-year period from January 2002 to December 2007.

As a result of its latest study, EDHEC recommended that SRI be integrated in a more global process, whereby quantitative research in finance is not abandoned in favour of a solely qualitative approach.

It said an approach that combined stockpicking with SRI criteria and a well-diversified portfolio-construction methodology could be an alternative to pure SRI, which it said was often practised with relative risk constraints linked to poorly diversified and inefficient cap-weighted indices.