ABSTRACT
This study tested how 20 top equity mutual funds, ranked by Barron's with sustainable-investing grades related to environmental, social and governance -ESG- screens, stack up to style-specific custom Benchmarks, in terms of net returns. Sharpe’s Style methodology using a constrained quadratic regression ranked 20 sample funds by their style performance over a four-year period using monthly returns. Exchange-traded- funds or ETF indices that acted as proxies for asset classes, were the regressors. Regressand was the returns on the mutual fund. Active management had a big role to play, particularly in pacific markets, and small cap stocks. The results were noteworthy and important to the extent that one can say that the sustainability strategy had a crucial impact on the performance of the mutual funds.
Keywords
ESG, ETF, Style Analysis, Mutual fund performance, active/passive management, custom benchmarks, Risk management, Quantitative finance, Quadratic programming. Sustainable fund, valuation; SRI, Ethical investing, Corporate social responsibility, Financial Economics, Math and Quantitative methods.