Do Active Sustainable Equity Funds Outperform Their Passive Peers? Evidence from the COVID-19 Pandemic

Fei Fang () and Sitikantha Parida
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Fei Fang: School of Business, Clark University, 950 Main St., Worcester, MA 01610, USA
Sitikantha Parida: School of Business, Clark University, 950 Main St., Worcester, MA 01610, USA

JRFM, 2025, vol. 18, issue 10, 1-16

Abstract: Sustainable investing has grown rapidly, but it remains unclear whether actively managed sustainable funds outperform passive ones. This study compares the performance of high-sustainable active U.S. equity mutual funds and their index peers from September 2018 to April 2022, dividing the period into pre-crash, crash, and post-crash phases around the COVID-19 market downturn. On average, both active and index funds underperform, with the sharpest losses occurring during the crash. High-sustainable funds outperform low-sustainable ones, particularly during the crash. However, high-sustainable active funds do not outperform their passive counterparts in any period. These results suggest that active management does not offer greater downside protection and raise questions about the higher fees typically charged by actively managed sustainable funds.

Keywords: sustainable funds; fund performance; active vs. passive funds; market crash; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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