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Sustainable investing in extreme market conditions: doing well while doing good

Abbas Valadkhani (Department of Accounting, Economics and Finance, Swinburne University of Technology, Hawthorn, Australia) (College of Business, Abu Dhabi University, Abu Dhabi, United Arab Emirates)
Barry O'Mahony (College of Business, Abu Dhabi University, Abu Dhabi, United Arab Emirates)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 17 May 2024




The aim of this study is to identify environmental, social and governance (ESG)-focused funds that can effectively uphold ethical principles while also delivering competitive financial returns by evaluating the performance of 24 well-established exchange-traded funds (ETFs). The study also compares the performance of four widely recognized ETFs representing NASDAQ (ticker: QQQ), S&P500 (SPY), Dow Jones (DIA) and Russell 2000 (IWM) with the sample of 24 ESG funds.


This paper utilizes four complementary measures, namely Sharpe, Sortino, Omega and Calmar ratios, to assess the risk-adjusted return performance of ETFs, with a particular emphasis on extreme downside risk.


The findings indicate that ESG-focused ETFs can predominantly outperform DIA and IWM in the last five years (1 November 2018–22 March 2023). However, when compared to QQQ and SPY, only ICLN, SUSA and DSI consistently delivered competitive risk-adjusted returns. The performance of DSI and SUSA is almost equivalent to QQQ and SPY even during the last ten years.

Practical implications

The paper conducts a risk-return analysis of alternative ESG investment funds, suggesting that not all ETFs are created equal and that careful selection is vital for achieving different investment objectives. It is imperative to recognize that past performance is not a reliable indicator of future outcomes, requiring consideration of other factors in the post-evaluation phase.

Social implications

The study provides evidence to support the “doing well while doing good” hypothesis, indicating that competitive returns are achievable while also engaging in socially responsible investment.


This study fills a vital gap in the literature on ESG investment by highlighting that the choice of funds stands as the primary factor responsible for the conflicting findings by previous studies.



We would like to thank the Editor and two anonymous referees, whose useful feedback considerably improved an earlier version of this article. The usual caveat applies.


Valadkhani, A. and O'Mahony, B. (2024), "Sustainable investing in extreme market conditions: doing well while doing good", Journal of Economic Studies, Vol. ahead-of-print No. ahead-of-print.



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