Does Sustainability Score Impact Mutual Fund Performance?

Pablo Durán-Santomil, Luis Otero-González, Renato Heitor Correia-Domingues and Juan Reboredo
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Pablo Durán-Santomil: Departamento de Organización de Empresas y Comercialización, Universidad de Santiago de Compostela, 27002 Lugo, Spain
Luis Otero-González: Departamento de Economía Financiera y Contabilidad, Universidad de Santiago de Compostela, 15782 Santiago de Compostela, Spain
Renato Heitor Correia-Domingues: Departamento de Economia, Finanças e Contabilidade, Instituto Politécnico de Viana do Castelo, 900-347 Viana do Castelo, Portugal

Sustainability, 2019, vol. 11, issue 10, 1-17

Abstract: Given that sustainable investing constitutes a major force across global financial markets, in 2016 Morningstar began reporting Morningstar Sustainability scores. We used the 2016, 2017 and 2018 scores to study the effects of socially responsible investments (SRI) on European equity fund performance. Sustainability scores impacted positively on performance, which was consistent with the idea that the mutual funds invested in companies with better scores generate better risk-adjusted and not-risk adjusted performance. We also tested the relation on mutual fund flows and risk. The sustainability score in the previous year is significant on the flows, so higher-rated funds receive a larger volume of funds. In terms of risk, the level of sustainability is negatively related to the value at risk (VaR) of the fund, supporting that higher scored mutual funds offer better protection against extreme losses.

Keywords: mutual fund performance; mutual fund flows; Sustainability Score; ESG score; Socially Responsible Investment; SRI (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:11:y:2019:i:10:p:2972-:d:234108

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