Constant and variable returns to scale DEA models for socially responsible investment funds

•We propose constant and variable returns to scale DEA models to evaluate SRI fund performance.•These models can be computed in all phases of the business cycle.•An empirical investigation on European SRI funds indicates that the returns to scale are variable.•We have analyzed the degree of social responsibility and the performance of the funds.•An empirical study suggests that the ethical objective can be pursued without sacrificing financial reward.

In order to evaluate the performance of socially responsible investment (SRI) funds, we propose some models which use data envelopment analysis (DEA) and can be computed in all phases of the business cycle. These models focus on the most crucial elements of an investment in mutual funds.In the literature both constant and variable returns to scale DEA models have been used to evaluate the performance of mutual funds. We carry out an empirical investigation on European SRI equity funds to test the presence of returns to scale (RTS).Another aspect taken into account by the empirical investigation is the measurement of the degree of social responsibility of SRI equity funds in various European countries. In addition, we analyse the performance of the funds considered with the different DEA models proposed, which differ in the way the ethical objective is taken into account.Moreover, the paper focuses on another crucial issue regarding socially responsible investing: the comparison of the performances between SRI and non-SRI funds. The empirical study suggests that the ethical objective can be pursued without having to renounce financial rewards.