A study of green European equity fund portfolio allocations

Mark Sanctuary, Axel Lavenius (), Giorgio Parlato (), Jan Plue () and Beatrice Crona ()
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Axel Lavenius: IVL Swedish Environmental Research Institute
Giorgio Parlato: Stockholm University
Jan Plue: Swedish University of Agricultural Sciences
Beatrice Crona: Stockholm University

No 499, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: This paper examines the extent to which the portfolios of green funds differ from conventional funds. We use non-metric multidimensional scaling to analyse 24 549 securities held by 6888 funds traded on European markets as of March 2023. Thisnumerical methodology reduces the fund compositional matrix from thousands ofdimensions to two dimensions, revealing patterns that can be studied graphically.Each fund is classified into three categories by the EU Taxonomy: dark-green,light-green, or conventional funds. With a few exceptions, the results indicate thatthe compositional differences in fund holdings across these three types of funds aresmall: green fund portfolios are largely the same as conventional fund portfolios. Anotable exception are energy sector funds where we find compositional differencesin the holdings of green and conventional funds. Our findings suggest that the EU’sregulatory effort on sustainable finance has not yet delivered on anti-greenwashingobjectives, and that ESG based investing is doin ittle to shift fund allocations.

Keywords: Sustainable finance; investment funds; ESG; Non-metric multidimensional scaling; ordination (search for similar items in EconPapers)
JEL-codes: D53 G11 M14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2024-06-17
New Economics Papers: this item is included in nep-eec, nep-ene and nep-env
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