Ethical finance convergence in the WAEMU (West African Economic and Monetary Union): an ARDL analysis

Abstract

Abstract This article examines the relationship between Socially Responsible Investment (SRI) and Islamic Finance in the West African Economic and Monetary Union (WAEMU) zone. Using the BRVM Socially Responsible Index (BRVM-SRI) and the ECOWAS Shariah index as respective representatives of SRI and Islamic ethical finance, we apply the ARDL (Autoregressive Distributed Lag) approach of Pesaran et al. (2001) to test the existence of a long-term equilibrium relationship between these two forms of ethical investment over the period 2010–2020. The results reveal a statistically significant cointegration relationship between the two indices, with a long-term elasticity of 0.741 and an adjustment speed of 27.1% per day. This convergence is more pronounced during crisis periods, particularly during the COVID-19 pandemic, where elasticity reaches 0.947 and adjustment speed 41.7%, evidencing a "flight to ethical quality" phenomenon. The Granger causality test reveals unidirectional causality from ECOWAS Shariah to BRVM-SRI, establishing the informational leadership of the regional market. These results have important implications for portfolio managers and institutional investors in West Africa, highlighting diversification potential, short-term arbitrage opportunities, and the international attractiveness of ECOWAS financial markets. Codes JEL : G100, G110, G120, G150, C32, C58.