October 03, 2011
Winner of 2011 Moskowitz Prize for Socially Responsible Investing is Announced
by Robert Kropp
The winning paper, announced tonight at SRI in the Rockies, finds that cost of equity capital is
lowered for companies with good corporate social responsibility practices.
Every year since 1996, the Moskowitz Prize for Socially Responsible Investing, awarded for
outstanding quantitative research in sustainable investing, is announced at the annual SRI in the Rockies conference,
held this year in New Orleans.
In announcing this year's winner earlier this
evening, Lloyd Kurtz, the Program Administrator of the Prize, reflected on the rarity of such
research in the field when the Prize was first awarded 15 years ago, and on how the quality of the
research of the submissions has improved since then.
"There was no evidence then. It was
like the worst features of everyone run amuck," Kurtz said. "Over here, Milton Friedman; over here,
Ben and Jerry's. Go," he said to the laughter of the 500 or so in attendance.
serious, Kurtz continued, "The Prize is not about what we would like to be true, or what we hope is
true. It's about what's going on. It is about saying something meaningful, based on the facts, to
help us become better practitioners of social investing. The Prize is intended to recognize good,
factual, empirical work that will help us better understand what we do."
the 2011 winner, Kurtz commended two Honorable Mentions: Environmental Externalities and Cost of
Capital, by Sudheer Chava; and Do Corporations Invest Enough in Environmental Responsibility?, by
Yongtae Kim and Meir Statman.
Referring to the quality of the two runners up, Kurtz said,
"This year's winner surmounted a very high hurdle because this was the most competitive field we
have ever seen."
The winner of the 2011 Moskowitz Prize was a paper entitled Does corporate social responsibility affect
the cost of capital? by Sadok El Ghoul, Omrane Guedhami, Chuck C. Y. Kwok, and Dev R. Mishra.
Stating that "The substantial rise of CSR practices has recently fuelled research on the
relationship between CSR and financial performance," the authors use data on US firms compiled by
the former KLD Research & Analytics (now part of MSCI), and determine that companies with better
CSR scores have lower costs of equity capital, or the return required by a company's shareowners.
Costs become significantly lower when CSR efforts are focused on employee relations, environmental
policies, and product strategies.
Furthermore, two industries normally shunned by
sustainable investors—tobacco and nuclear power—were found to have higher equity financing costs.
"The cost of capital could be the channel through which capital markets encourage firms to
become more socially responsible," the authors conclude.