The impact of fossil fuel divestments and energy transitions on mutual funds performance

Xiaozhu Guo, Chao Liang, Muhammad Umar and Nawazish Mirza

Technological Forecasting and Social Change, 2022, vol. 176, issue C

Abstract: Fossil fuel divestments are increasingly becoming an important medium to foster smooth energy transitions, particularly to sources that can be considered as pro- environment. Ultimately, the financial benefits emerging from such divestitures can incentivize investors. Therefore, following the same context, this paper assesses the comparative performance of 4712 fossil, and non-fossil fuel investment funds of the Eurozone, over a span of eleven years. Our findings show that there is no difference between the risk-adjusted performances of the two categories. This suggests that the fossil fuel investment style does not yield any incremental benefit for the investors. We have also documented that the performance tends to improve when the funds have rebalanced their portfolios, in order to transition from high emission companies to cleaner firms. Moreover, the results in this regard also remained robust for various specifications of performance. Our findings thus imply that investors can opt for low-carbon firms, without compromising on their investment targets and bottom lines.

Keywords: Fossil fuel divestments; Energy transitions; Mutual funds; Portfolio performance (search for similar items in EconPapers)
JEL-codes: G10 G11 Q32 Q40 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:176:y:2022:i:c:s004016252100860x

DOI: 10.1016/j.techfore.2021.121429

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