There has been considerable growth in socially responsible investments (SRI) in recent decades. Socially
responsible investments (SRI) stands at USD30.7 trillion in five major markets (Europe, US, Japan, Canada,
and ANZ) at the start of 2018 (Global Sustainable Investment Alliance, 2020) and in Australia, SRI constitutes
44% of all funds under management which is AUD2.24 trillion (Responsible Investment Association Australasia,
2019). This growth is puzzling in the context of modern portfolio theory, as SRI should amount to a constraint
on the feasible set of investments that decreases investors’ mean-variance utility. However, alternative
explanations have been put forward to justify the SRI choice.
Merton (1987) shows that in the context of incomplete information, if information on social responsibility is
concentrated amongst investors that adopt SRI, they can obtain higher returns. Alternatively, investor
preferences may differ from the neoclassical model of expected utility, enabling them to trade maximum
expected return in their investments for other benefits, such as psychological rewards (Bollen, 2007; Renneboog
et al., 2008) or superior performance in down markets (Lins et al., 2017).
A considerable volume of academic studies has examined the relative performance of SRI, with extant
Australian studies providing mixed evidence on the ability to generate abnormal returns from (Bauer et al., 2006;
Humphrey & Lee, 2011; Jones et al., 2008; Renneboog et al., 2008). In the context of the COVID–19 pandemic,
it is a good opportunity for students to evaluate the risk-adjusted performance of SRI and non-SRI investments.
1. Please submit a one-page investment report (see the exemplar posted in LEO) excluding references.
2. Submit the report via LEO using Turnitin and an excel file to ‘Individual Assignment Excel File’ under
3. Assignments submitted by other means (e.g. email) or forms (scanned copy, Excel document) will attract
You are an equity analyst in an investment bank. You need to write a report on the risk and return of Socially
Responsible Investment (SRI) and Conventional (non-SRI) investment in the context of the COVID-19
pandemic. SRI and Conventional (non-SRI) are proxied by S&P 500 Environmental & Socially Responsible
Index and traditional investment and S&P 500 index, respectively.
• S&P Dow Jones Indices LLC, a division of S&P Global:
o S&P500 Index (https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview)
o S&P 500 Environmental & Socially Responsible Index
• Excel file containing data for S&P500 and S&P 500 Environmental & Socially Responsible Index
available in BAFN204 Project Data file posted under Assessment in LEO.
30 Sep 2010−17 Jul 2020
Write a one-page investment report (see the exemplar posted in LEO) on the risk and return of SRI and nonSRI investments with the following parts:
Analysis of asset returns: 30 marks
• The analysis of asset returns includes the discussion on average return, maximum and minimum return and
distribution of returns.
Portfolio Return and Risk: 30 marks
• You need a create a two-asset portfolio having the equal weighting for each investment. After creating the
portfolio, you need to analyse portfolio return and risk.
Risk Measure (Sharpe Ratio): 10 marks
• You need to calculate the Sharpe Ratio of each index return and choose the best investment on the basis
of Sharpe Ratio.
Value at Risk (VaR): 30 marks
• You need to calculate the Value at Risk using a normal distribution at 95% confidence level for each
investment listed above and choose the best investment on the basis of VaR.
Type of service-Academic paper writing
Type of assignment-Essay
Pages / words-1 / 550
Academic level-Sophomore (College 2nd year)