Interest in the notion of the possible financial sacrifice suffered by socially responsible investment (SRI) fund investors for considering ethical, social and environmental issues in their investment decisions has spawned considerable academic interest in the performance of SRI funds. Both the Australian and international research literature have yielded largely mixed results. However, several of these studies are hampered by methodological problems which can obscure the significance of reported results, such as the use of small sample sizes, inconsistencies in the time (...) frames selected to analyse performance and different modelling frameworks used to estimate investment returns. This study attempts to redress some of these issues by investigating the returns performance of 89 ethical funds in Australia over the period 1986-2005. Using a multi-factor CAPM model [Fama, E. F., and K. R. French (1996) J. Finance 51(1), 55] (which controls for factors such as size, book-to-market value and momentum) we find that ethical funds significantly under-perform the market in Australia, particularly in the most recent 5 years of our sample period (2000-2005). Risk adjusted returns (using Jensen's alpha) indicate that average annual underperformance is around 1.52% in the 2000-2005 period for our sample and .88% over the whole sample period. Our results contrast with many previous studies (both Australian and international), which have not found statistically significant differences in the performance of ethical funds relative to market benchmarks and/or a matched sample of conventional funds. (shrink)

Drawing on calls by researchers to examine corporate scandals involving potential conflicts of interest or compromise to professional independence involving the actuarial profession, this article outlines one such case. The consulting actuaries – to a large Australian listed company, James Hardie Industries Limited – found themselves advising two parties in a corporate restructuring where the interests of each were sometimes competing and the interests of the public appeared to be ignored. The James Hardie case is instructive in a number of (...) ways: first, it demonstrates the subtlety with which conflicts of interest or pressures on professional independence can arise; second, it demonstrates how important professional issues can be obfuscated by more obvious and pressing financial and strategic issues; and finally it demonstrates that adherence to professional codes of conduct and the ease with which professional ethics can be compromised when those codes are vague and transgressions are rarely actionable. The James Hardie case highlights structural issues in the employment of consulting actuaries which presents risks to the profession. It demonstrates that the combination of an aggressive corporate management with a strategic agenda reliant on consulting actuaries that have a vested interest in promoting and maintaining valuable relationships, both financially and professionally, results in ethical challenges. (shrink)