ABSTRACT
Since corporate social responsibility (CSR) was launched as an idea in the 1970s, countless attempts have been made to answer the question of its profitability. An extensive analysis of the first-time CSR reports of American companies and their potential impact on the cost of capital is conducted. It shows that the cost of capital decreases during the year in which the company publishes its first CSR report compared with the cost of capital in the preceding year. CSR reporting has a proven connection to share prices, and in particular it has an influence as a form of 'insurance' in relation to companies' reputations during particularly negative events - perhaps especially for institutional investors. The inconsistencies found in the data from reports of CSR-reporting companies are even more problematic. The three forms of screening, Negative screening; Positive screening; Best in class, cause a significant bias in the analyses that are based on such Socially Responsible Investing (SRI) indices.
