SRI Impacts on Environmental and Financial Performance: Evidence from European Listed Companies (The Net-Zero Innovation Fund Model Proposal)

This research paper, submitted to the 16th Annual Engaged Management Scholarship (EMS) Conference, presents rigorous empirical evidence on the structural relationship between Socially Responsible Investment (SRI) and corporate performance across European listed companies. Drawing on a comprehensive dataset spanning 2020–2022, the study investigates two fundamental questions: first, whether SRI directly influences the environmental performance of investee corporations; and second, to what extent SRI moderates the relationship between a firm's environmental trajectory and its subsequent financial performance. The findings are both significant and counterintuitive. While SRI succeeds in driving short-term compliance gains, particularly in emissions management and resource efficiency, it demonstrably fails to incentivize long-term environmental innovation, particularly within carbon-intensive sectors. More strikingly, SRI intensity amplifies the market penalty faced by polluting firms that improve their environmental scores, revealing a structural paradox at the heart of responsible finance. These empirical contradictions form the evidentiary foundation for the study's central practical contribution: the Net-Zero Innovation Fund (NZI Fund), a hybrid investment vehicle designed to break the cycle of short-termism that afflicts current SRI frameworks. By co-investing in both listed transition leaders and unlisted green-tech start-ups, the NZI Fund proposes a systemic solution to the innovation deficit identified in the data.