The impact of socially responsible investment on environmental performance: illusion or reality?

Business Science Institute
vor 13 Stunden
6 Min. Lesezeit

Leïla Kamara, Dr. DBA

Research Associate at the Business Science Institute

DBA Managerial Impact Award, 2024

EDBA ATLAS-AFMI Best Thesis Award, 2025

Founder of Kamara Advisory,

the Grand Duchy of Luxembourg's S.I.S. dedicated to promoting sustainable investment

As COP30 meets in Belém, Brazil, this November, we are tempted to ask the question that preoccupies every citizen, investor, and entrepreneur: to what extent do socially responsible investments impact companies' environmental performance?

Data finally available thanks to European regulations

From an academic point of view, the relationship has long been difficult to prove, mainly for two reasons: the lack of non-financial data published by companies and the lack of transparency regarding the assets held in investment fund portfolios. In Europe, the regulations that emerged from the Green Deal have addressed these constraints. First, SFDR, which requires investment companies to publish the contents of their portfolios since 2021, makes quantitative analyses in this regard possible. Second, CSRD, which reinforces the NFDR adopted in 2014 for large companies, will provide more detailed information on the ESG performance of the companies concerned once it is fully implemented. Thus, the comparison of these data has already given rise to a number of empirical studies.

Are SRI funds really responsible?

Cultrera, Godfroid, and Heyman (2024) sought to verify whether socially responsible investment (SRI) funds were “truly responsible.” The authors analyzed 68 SRI funds on the Belgian market, which, although representing €22.4 billion in 2022, remains largely untapped in terms of impact and does not yet seem to have established its credibility, as investors still express mistrust towards this type of fund. Their work focused on comparing the extra-financial performance of SRI funds with equivalent conventional funds and comparing different categories of SRI funds (Article 8 versus Article 9). To measure extra-financial performance, the authors used data produced by Morningstar and Factset, taking into account information such as the corporate sustainability score, environmental risk, and revenue exposure to sustainable impact solutions.

Non-parametric tests (Wilcoxon and Mann-Whitney) enabled them to observe, on the one hand, that the ESG performance of SRI funds is superior to that of conventional funds and, secondly, that ESG risks are significantly lower for SRI funds, with a predominance of environmental risks, which appear to be the least risky compared to governance or social risks. As for the comparison between Article 8 and Article 9 funds, the results do not seem to indicate any significant difference. The authors point to the lack of data availability for certain funds and suggest changes to SFDR regulations to require investment funds to disclose more data, submit to a supervisory body that would validate the classification of funds, gradually increase their SRI offering, and systematically exclude certain sectors of activity such as armaments. We agree with many of these recommendations, such as the need to increase the transparency of the audit carried out through an impact report, for example. The investable universe could be better controlled, particularly in terms of derivatives that may contain undesirable underlying assets. We have also proposed limiting eligibility to Article 9 funds for greater credibility.

Environmental innovation, the great forgotten aspect of responsible investment

The work carried out with Prof. Nekhili (University of Le Mans) focused on the impact of responsible investment on the environmental and financial performance of listed companies (2024). We targeted a sample of 21 French SRI-labeled funds (€799 billion in assets under management in 2024) issued by the world's leading French investment company, Amundi (selected using a non-probabilistic quota methodology), and compared the extra-financial performance of the top 10 assets held in the portfolio with the amounts invested by each of the funds. We used ESG data from the London Stock Exchange Group (LSEG), focusing on ratings for the Environment pillar and its components: Emissions, Resources, and Innovation. We performed a multivariate analysis (simple linear regression tests and tests of the system of apparently unrelated regressions), which yielded 279 observations.

Our results were mixed. The Emissions and Resources components had a positive impact, which could be explained by companies' desire to comply with the regulations set out in the Green Deal (2019), itself implemented following the Paris Agreement (2016) targeting the reduction of greenhouse gas emissions and the improvement of natural resource management. Conversely, the Innovation component is neglected, particularly among companies operating in polluting sectors such as chemicals, oil & gas, aerospace, and defense, to name just the most impactful. There are several possible explanations for this lack of interest in environmental innovation. According to Heinkel, Kraus, and Zechner (2001), companies only transform their production methods if this enables them to attract sufficient investment to cover the costs associated with these developments. According to the authors, investing at least a quarter of a fund's assets based on SRI principles should encourage polluting companies to transform their production model. However, the concept of eco-efficiency developed by Porter and van der Linde (1995), which consists of reducing pollution to improve the productivity with which resources are used, seems more relevant than ever, insofar as environmental innovations are “sources of competitiveness and productivity gains for companies” (Capelle-Blancard et al., 2006). The lack of interest in environmental innovation is likely a consequence of the absence of regulatory constraints.

Public initiatives to boost green innovation

Since the 2020s, public authorities have taken up the issue because it will be impossible to achieve the goals they have set if disruptive changes are not made quickly by all stakeholders. Thus, in order to boost the Innovation component, in November 2021 the United Nations created the Climate Change Global Innovation Hub (UGIH), which aims to “promote transformative innovations for a low-emission and climate-resilient future.” At the 29th Conference of the Parties (Baku, Azerbaijan), participants launched the Global Matchmaking Platform (GMP), which tracks the decarbonization of high-emission companies in developing countries by connecting them with technical and financial solutions. To date, the platform has identified a financing need of USD 125 billion to achieve the Paris Agreement target.

In Europe, the European Innovation Fund, created in 2020, aims to “bring to market industrial solutions that decarbonize Europe and support its transition to climate neutrality while promoting its competitiveness” (European Investment Bank, 2025). The fund draws its financing from revenues collected on the European carbon trading market (EU ETS). The valuation is estimated at €45 billion (based on a carbon price of €75/tCO²) for the 2020-2030 financing period. Each year, the fund selects new projects to finance. By the end of 2023, the fund had subsidized 104 projects for nearly €6.5 billion in 20 sectors, enabling the avoidance of 442 million tons of CO² equivalent, which corresponds to 14% of GHG emissions in the European Union in 2022, as a reference (Commission Report COM (2024) 566 final).

The older InvestEU (2018), under the aegis of the European Investment Fund (EIF), is an initiative targeting innovative small and medium-sized enterprises with the aim of "mobilizing €372 billion in public and private investment through an EU budget guarantee of €26.2 billion " over the period 2021-2027 (investeu.europa.eu). By the end of April 2025, the fund had generated more than 4 million jobs, supported more than 53,000 SMEs, and released €95.6 billion in investment supporting industrial transition.

Faced with the urgent need for action and in line with the priorities announced in June 2024 by EIB President Nadia Calviῆo, TechEU was launched in August 2025 to mobilize €250 billion by 2027 for innovation, particularly for start-ups. It is precisely the financing of start-ups creating innovative solutions that transform the production models of polluting companies that was at the heart of our recommendations. This recommendation echoes the results we obtained not only in terms of environmental performance but also in terms of financial performance, which proved to be particularly negative for polluting companies. Our results are reminiscent of those of Tebini (2013), who conducted an empirical analysis of US companies over the period 1991-2007, examining the correlation between financial performance and social/environmental performance, and indicated that environmental performance has a negative impact on financial performance, with a more pronounced effect among the least risky and least innovative companies. Nevertheless, he indicates that the trend is reversing over time, particularly for innovative companies, with a positive effect. This finding should further encourage investors to demand that companies adopt a more advanced strategy on the issue of environmental innovation.

References

Cultrera, L., Godfroid, C., & Heyman, M. (2024). Are socially responsible investment funds (SRI) truly responsible? The case of Belgium. Revue française de gestion, 316(3), 81-105.

Tebini, Hajer. Relationship between financial performance and social/environmental performance: a critical analysis. Diss. Université du Québec à Montréal, 2013.

See the thesis defense of Leïla Kamara, Dr. DBA: