Beyond labels: a methodological framework for comparing green and conventional funds1

Axel Lavenius and Mark Sanctuary

Chapter 5 in Handbook of ESG Investing, 2026, pp 80-109 from Edward Elgar Publishing

Abstract: This chapter examines whether Green Investment Funds (GIFs) allocate capital differently from conventional funds and introduces non-metric multidimensional scaling (NMDS) as a novel method for fund comparison. Applying NMDS to European equity holdings, we demonstrate how revealed peer groups based on actual portfolio similarity offer a transparent alternative to benchmark– or ESG rating-based classifications. Our analysis identifies only limited and context-dependent differences between GIFs and conventional funds, with substantial portfolio overlap overall. Moreover, carbon emissions and Morningstar Sustainability Ratings offer little evidence that GIFs systematically reduce exposure to high-carbon assets or invest in firms with stronger ESG profiles. These results highlight both the value of NMDS as a methodological contribution and the challenge of demonstrating credible impact in sustainable finance, underscoring the need for more rigorous disclosure and verifiable measures of environmental and social outcomes.

Keywords: Asset management; Sustainable finance; Investment funds; ESG; Non-metric multidimensional scaling; Ordination (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035322770
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