Do Green Investments Trick or Treat? A Quarter Century of Evidence from European Mutual Funds Performance

41 Pages Posted: 25 Nov 2014

See all articles by Gbenga Ibikunle

Gbenga Ibikunle

University of Edinburgh; European Capital Markets Cooperative Research Centre

Tom Steffen

University of Edinburgh

Date Written: November 22, 2014

Abstract

We conduct the first comparative analysis of the financial performance of European green, black (fossil energy and natural resource) and conventional mutual funds. Based on a unique dataset of 175 green, 259 black and 976 conventional mutual funds, the investigation contrasts the financial performance of the three dissimilar investment orientations over the 1991-2014 period. Over the full sample period, green mutual funds significantly underperform relative to conventional funds, while no significant risk-adjusted performance differences between green and black mutual funds could be established during the same period. Environmentally friendly investment vehicles display a significant exposure to small cap and growth stocks, while black funds are more exposed to value stocks. Remarkably, the green funds’ risk-adjusted return profile progressively improves over time until no difference in the performance of the green and the conventional classes could be discerned. Further evidence suggests that the green funds are beginning to significantly outperform their black peers, especially over the 2012-2014 investment window.

Keywords: Green mutual funds, black mutual funds, conventional mutual funds, socially responsible investments, risk-adjusted returns

JEL Classification: F30, G11, G15, G23, M14

Suggested Citation

Ibikunle, Gbenga and Steffen, Tom, Do Green Investments Trick or Treat? A Quarter Century of Evidence from European Mutual Funds Performance (November 22, 2014). Available at SSRN: https://ssrn.com/abstract=2530046 or http://dx.doi.org/10.2139/ssrn.2530046

Gbenga Ibikunle (Contact Author)

University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

European Capital Markets Cooperative Research Centre ( email )

Viale Pidaro 42
Pescara, 65121
Italy

Tom Steffen

University of Edinburgh

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
95
Abstract Views
975
rank
333,190
PlumX Metrics