The Resilience of the Socially Responsible Investment Networks

A network model is introduced and developed to compare portfolios of funds which are high ranked in Environmental Social and Governance (ESG) aspects with those with a poor ESG compliance. The nodes in the network represent funds and the edges are weighted on the basis of the capitalization due to the common components of the connected nodes. We specifically deal with the reactions of the considered financial networks to exogenous shocks of negative financial nature. To this aim, we provide a novel definition of the resilience of a financial network in terms of the stability of its community structure. We test the theoretical proposal on different networks characterized by different ESG scores. We find that the high ranked fund's networks are more resilient than the corresponding networks of low ranked funds.