We investigate how conventional asset managers account for environmental, social, and governance (ESG) factors in their investment process. We do so on the basis of an international survey among fund managers. We find that many conventional managers integrate responsible investing in their investment process. Furthermore, we find that ESG information in particular is being used for red flagging and to manage risk. We find that many conventional fund managers have already adopted features of responsible investing in the investment process. Furthermore, we argue and show that ESG investing is highly similar to fundamental investing. We also reveal that there is a substantial difference in the ways in which U.S. and European asset managers view ESG.

This paper analyses fund management styles on the Euronext stock exchanges. Especially, we investigate how social responsibility is accounted for. We use style

Investors are no worse off by excluding assets from their portfolio that are not socially responsible in case they face a short sales restriction. In fact, this conclusion will hold for most investor types. However, in case short sales are allowed for, investors are worse off in terms of foregone risk reduction opportunities for most dimensions of social responsibility. We use data for more than 2,000 US based companies for the period 1991-2004. We use mean-variance spanning tests to investigate whether investors are worse off in meterms by excluding assets from their portfolio that are not socially responsible.

Many performance measures, such as the classic Sharpe ratio have difficulty in evaluating the performance of mutual funds with skewed return distributions. Common causes for skewness are the use of options in the portfolio or superior market timing skills of the portfolio manager. In this article we examine to what extent downside risk and the upside potential ratio can be used to evaluate skewed return distributions. In order to accomplish this goal, we first show the relation between the risk preferences of the investor and the risk-adjusted performance measure. We conclude that it is difficult to interpret differences in the outcomes of risk-adjusted performance measures exclusively as differences in forecasting skills of portfolio managers. We illustrate this with an example of a simulation study of a protective put strategy. We show that the Sharpe ratio leads to incorrect conclusions in the case of protective put strategies. On the other hand, the upside potential ratio leads to correct conclusions. Finally, we apply downside risk and the upside potential ratio in the process of selecting a mutual fund from a sample of mutual funds in the Euronext stock markets. The rankings appear similar, which can be attributed to the absence of significant skewness in the sample. However, find that the remaining differences can be quite significant for individual fund managers, and that these differences can be attributed to skewness. Therefore, we prefer to use the UPR as an alternative to the Sharpe ratio, as it accounts better for the use of options and forecasting skills.