From 1967 to 1997, the Super Bowl Indicator correctly predicted the Dow Jones index to rise or fall 28 of 31 times. Does this mean that the Super Bowl winner has any real impact on the market?
Probably not. It's far more likely that this just means that the Dow Jones index usually goes up and that the old NFL teams usually won. As a result, most years both things occurred. As the old NFL's dominance ebbed, the indicator has been less "reliable".
Is there anything like that that could explain Socially Responsible Investing (SRI) doing better than average? Sure. All that it would take would be for the last ten years to be better than average for that particular SRI fund. That could happen because the last ten years have been bad for some traditional investments, e.g. oil prices have fallen over that time.
Over 10 years, the balanced Australian Ethical fund has a 4.7% return compared to Vanguard's 4.39%.
Pick a hundred random stocks that were for sale in Australia in 2006. Calculate the return. Now do that a thousand more times. By your thesis, that a 4.7% return is a statistically significant improvement over a 4.39% return, at least 95% (if not 97.5%) of the time, this should be less than 4.7%. I suspect that rather than the twenty-five or fifty examples of such divergence, you'll have at least a hundred.
A given managed fund can beat the market over a ten year period. They do so regularly. On average though, all the funds will lose money relative to the market.
It's possible that SRI funds will beat the market over the next ten years. They have a strategy. That strategy can have different performance over a ten year period. It might be better performance.
Fidelity breaks down performance by sector. The three best sectors over the last ten years were Consumer Discretionary, Information Technology, and Healthcare. The three worst were Financials, Energy, and Telecommunication Services. So if SRI looks down on traditional Energy investments, that alone could explain better results. Particularly such modestly better results.
An even better return could have been achieved by investing in only Consumer Discretionary. That's a US result, but presumably there is an Australian equivalent.
They may be right that SRI has been better since it has been introduced. But like with the Super Bowl Indicator, people should be careful not to rely on this too much. The Super Bowl Indicator was incorrect for three years in a row from 1998-2000. Energy was the second worst sector in the last ten years and the worst in the last five and three years. But in the last year it roughly tracked the market. The worst sector has been Healthcare.