Risk and return analysis of socially responsible equity investment for optimum portfolio

Abstract

The sustainable development goals of industry, innovation and infrastructure aims at building sustainability by paving way for socially responsible investing. Socially responsible investing identifies investment newlineavenues that considers social and environmental responsibilities along with newlinefinancial return. The question of risk and return relationship and whether socially responsible investment outperforms conventional investment has been keen area of interest to empirically drive investors in order to establish an optimal portfolio for socially responsible equity investments. The aim of the study is identifying Equity investments which are Socially Responsible newlinefrom listed Equity investments in India, to examine whether socially responsible equity investments outperformed conventional equity newlineinvestments, to assess the equity investments performance which are socially responsible and equity investments which are conventional across different sectors based on the risk adjustment metrics for establishing an Optimal Equity portfolio which are Socially responsible with Sharpe Index newlineOptimization Model. The study identified socially responsible companies which adhered to sustainability reporting and disclosures of ESG from the total companies listed newlinein BSE and NSE as on 31.12.2021. Annual average return rate, standard deviation, beta and different risk adjustment metrics for evaluating the performance of equity investments which are socially responsible and the equity investments which are conventional was utilized by the study. The newlinesample period of the research between lies between 2012 to 2022. Correlation analysis as well as t-test have been performed using E-views software. Socially responsible equity companies showed significant strong positive newlinerelationship of risk and return than conventional companies. Commodities, Health care, Industrials, Information Technology and Telecommunication sectors outperformed conventional companies of similar sector.