While a number of studies based on the performance of socially responsible mutual funds have attempted to answer the performance question, they have limitations, since there are a number of factors, such as manager skill, that also
meaningfully affect returns. One recent study by Derwall et al. (2004) made a great leap ahead in that it used a sophisticated multifactor framework on which to evaluate whether strong environmental performance translates into
superior equity performance. They concluded that their ‘findings provide evidence suggesting that the benefits of considering environmental criteria in the investment process can be substantial.