Responsible or Thematic? The True Nature of Sustainability-Themed Mutual Funds

Federica Ielasi and Monica Rossolini
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Federica Ielasi: Department of Economics and Management, University of Florence, 50127 Florence, Italy
Monica Rossolini: Department of Business and Law, University of Milano-Bicocca, 20126 Milan, Italy

Sustainability, 2019, vol. 11, issue 12, 1-17

Abstract: The aim of the paper is to compare the risk-adjusted performance of sustainability-themed funds with other categories of mutual funds: sustainable and responsible mutual funds that implement different approaches in portfolio selection and management, and thematic funds not committed to responsible investments. The study analyses a sample of about 1000 European mutual open-end funds where 302 are sustainability-themed funds, 358 are other responsible funds, and 341 other thematic funds. Risk-adjusted performance is analyzed for the period 2007–2017 using different methodologies: a single factor Capital Asset Pricing Model (CAPM), a Fama and French (1993) 3-factor model, and a Fama and French (2015) 5-factor model. Our main findings demonstrate that the risk-adjusted performance of ST funds is more closely related to their responsible nature than to their thematic approach. Sustainability-themed mutual funds are more similar to other socially responsible funds than to other thematic funds, as confirmed by performance analysis over time. They are also better than other thematic funds in overcoming financially turbulent periods and currently benefit from SRI regulation and disclosure.

Keywords: fund managers; mutual fund; ESG investing; socially responsible funds; thematic funds; sustainability-themed funds (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 (12)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:11:y:2019:i:12:p:3304-:d:240091

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