Socially responsible equity funds may offer a variety of investor benefits, but superior risk-adjusted performance isn’t one of them, says Fitch Ratings.

In a new report, the rating agency points out that socially responsible investing (SRI) strategies alone have not improved the average risk/return profile of a European equity fund in the recent past. “Even on a longer term basis, including 2008, downside protection is not statistically proven,” it says.

“While exhibiting similar Total Expense Ratios, SRI funds have on average underperformed non SRI funds by 0.6% annually over the past three years in the European and eurozone equity Lipper categories,” Fitch says.

Investors often view SRI as a lower risk and more defensive stock picking strategy, it notes, but warns this has not been confirmed in the past three years as SRI funds have exhibited slightly higher volatility and drawdown than non-SRI funds.

That said, Fitch acknowledges that this doesn’t take into account the non-performance related benefits that SRI investors may receive, such as the carbon footprint, or social impact, of their investments.

Nevertheless, Fitch cautions investors against neglecting the investment processes of SRI funds, including their reactivity, focus on strategic stock research, and active risk management. “As SRI has recently developed, investors have focused their attention mainly on new environmental, social, and corporate governance criteria and their reporting. Yet, SRI is no protection to poor or average investment processes,” it warns.

The firm also reports that, while equity funds appear to have underperformed, European SRI bond funds have delivered better returns with lower risk in the past three years. The rating agency says that SRI filters have “statistically added value” in euro bond fund categories.

“When applied to bond funds, SRI criteria reinforce fundamental biases and have resulted in greater deviation relative to debt-weighted indices, notably on peripheral sovereign and bank debt,” it says.

The rating agency notes that SRI is newer in bond funds, with 5% of the 1,200 European bond fund universe employing it, compared with 7.5% of the 1,900 European equity funds claiming to follow an SRI approach.