Sustainability ratings and fund performance: New evidence from European ESG equity mutual funds

Spyros Papathanasiou and Drosos Koutsokostas

Finance Research Letters, 2024, vol. 62, issue PA

Abstract: Given the rising trend of sustainable investing over the recent years, we examine how ESG ratings affect the performance, performance persistence and flow of new money European equity mutual funds have experienced for the period from January 1, 2010 to December 31, 2022. Results show that low-rated ESG funds display better performance, stronger positive performance persistence and weaker flow-performance relationship. During the COVID-19 pandemic, investors became risk-averse, withdrawing from low-rated ESG funds despite their prior superior performance. Contrariwise, investors’ preference for funds that incorporate sustainable assets to a great extent denotes that sustainability is perceived by investors as a necessity.

Keywords: ESG equity mutual funds; ESG score; Performance; Performance persistence; Flow; COVID-19 (search for similar items in EconPapers)
JEL-codes: G11 G23 M14 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001259

DOI: 10.1016/j.frl.2024.105095

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