Khalil Al Ayoubi

Composition of the Jury

Abstract

The rapid growth of sovereign wealth funds (SWFs) over the past two decades has been accompanied by a renewed interest in socially responsible investing (SRI). This dissertation, which is structured around three studies, examines the implications of this strategy for the performance of their portfolios. The first study examines the efficiency of SWFs in terms of financial performance and social responsibility. To assess the latter, we developed and calculated the first score evaluating the social responsibility of SWFs. We employ a nonparametric methodology using several combinations of inputs and outputs. We show, on the one hand, that many SWFs are efficient, and, on the other hand, that SWFs’ involvement in SRI is growing and significant. In a second study, we analyze the impact of implementing an SRI strategy—negative screening—on the financial performance of SWFs. Our results indicate that a divestment strategy does not harm SWF returns and reduces their overall risk. Finally, in the last study, we examine the influence of negative screening on the value of companies excluded from SIF portfolios, focusing on the Norwegian fund—the largest SIF in terms of size and renowned for its social responsibility. Through event studies, we show that excluded companies experience a loss in value. This is particularly true for companies excluded for failing to comply with ESG values, whose market value decreases significantly over the long term. This implies that the Norwegian fund, through the disclosure of new information, sends a signal regarding the ESG performance of excluded companies and thus contributes to the efficiency of financial markets. Our three studies therefore seem to indicate that the implementation of SRI would not only have no negative impact on the performance of asset managers but could also improve the social responsibility of the companies in their portfolios. The conceptual and empirical results of this thesis contribute to the growing body of literature on the social responsibility of asset managers and are of interest to public and private market participants.