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Article
Publication date: 6 August 2018

Federica Ielasi, Monica Rossolini and Sara Limberti

This paper aims to analyze the portfolio characteristics and the performance measures of sustainability-themed mutual funds, compared to ethical mutual funds that implement…

1552

Abstract

Purpose

This paper aims to analyze the portfolio characteristics and the performance measures of sustainability-themed mutual funds, compared to ethical mutual funds that implement different sustainable and responsible investment strategies.

Design/methodology/approach

The study refers to a European sample of 106 ethical funds and 51 sustainability-themed funds. The monthly performance of each fund is downloaded from Bloomberg for the period from January 1996 to December 2015. By applying a Fama and French (1993) three-factor model, the authors overcome the limits of a capital asset pricing model (CAPM) based-single index model, to compare the performance of the two categories of funds.

Findings

Sustainability-themed funds do not differ significantly from ethical funds in terms of portfolio attributes, except for market capitalization, age and net asset value. Regarding performance measures, the results shows that sustainability-themed funds have a lower underperformance than ethical funds (as measured by Jensen’s alpha), whereas the samples do not differ in terms of market risk (as measured by Beta coefficient). The idiosyncratic risk of sustainability-themed funds is positively influenced by the specific portfolio strategies. The sustainability-themed funds show a higher concentration in the industrial sector and a lower exposure to financial sector than ethical funds; in terms of geographical strategy, they are more global and international oriented; they mainly focus on small caps and value stocks.

Research limitations/implications

The different sustainable and responsible investment strategies can be applied simultaneously and in a growing number of possible combinations. Mutual fund managers can consider thematic approach as an efficient opportunity for reconciling financial performance and economic sustainability. It is demonstrated that sustainability-themed funds adopt a portfolio strategy significantly different from ethical funds and from the environmental, social and governance benchmarks. Mutual fund managers implement a thematic specialization without any negative impact on the funds returns compared to ethical funds; actually, with a proper diversified portfolio, they are able to reduce idiosyncratic risk.

Originality/value

The analysis is extremely innovative, especially for the thematic sample. During the past 15 years, literature about sustainable and responsible investment has been focused especially on the differences in terms of risk and performance between socially responsible and conventional funds. This paper, starting from the methodology applied in these studies, wants to compare two different types of socially responsible strategies, with a specific focus on sustainability-themed mutual funds, given their exponential growth in the past few years.

Details

The Journal of Risk Finance, vol. 19 no. 3
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 8 March 2024

Said Elfakhani

This study aims to test mutual fund superiority, comparing the performance of 646 Islamic mutual funds with 475 ethical funds and conventional proxies.

Abstract

Purpose

This study aims to test mutual fund superiority, comparing the performance of 646 Islamic mutual funds with 475 ethical funds and conventional proxies.

Design/methodology/approach

This study uses statistical methods including paired t-statistics of independent samples, one-way Bonferroni test–analysis of variance–F-statistic for testing means equality, the chi-squared test for median equality and regression models corrected for heteroscedasticity. These methods are used to identify superiority of mutual funds and to validate the significance of the results.

Findings

The findings confirm the superiority of conventional funds over ethical funds and ethical funds over Islamic funds. Both ethical and Islamic funds, however, outperform conventional proxies during some recessionary periods. Moreover, stronger performance is recorded for Islamic funds in Europe and North America regions and across age and asset allocation categories, but limited support for reversal fund size, composition focus and reversed price effect.

Research limitations/implications

These findings should assist investors when deciding to invest and motivate Islamic and ethical funds to improve their portfolio formation and asset allocation strategies set by their professional managers.

Originality/value

The originality of this study is in its comprehensive approach in that it compares the performance of funds after accounting for such characteristics as fund objectives, size, age, asset allocation, geographical investment focus, fund composition focus, share price levels and the effect of global crises. This study approach is not only original and productive in documenting Islamic funds’ performance for the past three decades (1990–2022) but can also update the literature on these characteristics collectively and individually.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Open Access
Article
Publication date: 12 May 2022

Noelle Greenwood and Peter Warren

Framed within global policy debates over the need for private financial flows to align with the capital requirements of the Paris Agreement, this paper examines UK asset managers…

4313

Abstract

Purpose

Framed within global policy debates over the need for private financial flows to align with the capital requirements of the Paris Agreement, this paper examines UK asset managers in their approaches to disclosing and managing climate risk. This paper identifies and evaluates climate risk management practices among this under-researched investor group in their capacity to address fundamental behavioural obstacles to low-carbon investment.

Design/methodology/approach

This paper takes an inductive approach to document analysis, applying content and thematic analysis to the annual disclosures of the 28 largest UK asset managers (by assets under management), including the investment management arms of insurance and pension companies.

Findings

The main takeaway from this research is that today’s climate risk management strategies hold potential to effectively address traditionally climate risk-averse investor behaviour and investment processes in the UK asset management context. However, this research finds that the use of environmental, social and governance (ESG) investment strategies to mitigate climate risks is a “grey area” in which climate risk management practices are undefined within broad sustainability and responsible investment agendas. In doing so, this paper invites further research into the extent to which climate risks are considered in ESG investment.

Originality/value

This paper contributes to research in sustainable finance and behavioural finance, by identifying the latest climate risk management techniques used among UK-headquartered asset managers and uniquely evaluating these in their capacity to address barriers to low-carbon investment arising from organisational behaviours and processes.

Details

International Journal of Climate Change Strategies and Management, vol. 14 no. 3
Type: Research Article
ISSN: 1756-8692

Keywords

Article
Publication date: 30 May 2023

Francesco Baldi and Neophytos Lambertides

This study investigates the relation between ESG-driven investment strategies and the performance of infrastructure funds. More specifically, this study examines the impact of the…

Abstract

Purpose

This study investigates the relation between ESG-driven investment strategies and the performance of infrastructure funds. More specifically, this study examines the impact of the different dimensions – environmental (E), social (S) and governance (G) – of the ESG profile of infrastructure funds on their performance.

Design/methodology/approach

To study the risk-return properties of infrastructure funds and the relationship with their ESG profiles, an econometric analysis is conducted, based on a sample of 180 listed, ESG-oriented infrastructure funds identified through Refinitiv Eikon.

Findings

The results show that infrastructure funds with more solid environmental investment policies experience a lower performance, while those with a stronger social orientation yield a superior performance. Governance-related investment policies seem trivial in determining the performance of these funds. Further analysis shows that ESG controversies have a negative impact on infrastructure funds' performance, whereas Emissions and Resource Use scores, both proxying for different elements under the environmental pillar, have opposite signs. Finally, the Community score has a positive impact on funds' performance consistent with the positive impact of the social pillar score. The study also provides a number of sub-sample analyses to shed light on the conditions under which each pillar has significant impact on funds’ performance.

Practical implications

First, infrastructure funds should choose the composition of their portfolio holdings in a way that the total return is not penalized by the prevalence of the tricky E aspects (compliance with environmental regulations) over the main benefits of the S dimension. Second, fund managers need to bet on infrastructures with an expected impact on the social pillar dimension such as those aimed at promoting the wealth of the local communities (e.g. hospitals, schools). Third, to strengthen the fund's social dimension, fund managers must increase the dollar amount of the assets under management to count on a higher firepower.

Originality/value

This study makes three contributions to literature. First, the ESG profiles of the infrastructure funds operating both at local and global level and their relationship with annual performance are studied. Second, the different dimensions of the ESG profile of infrastructure funds are investigated by measuring their impact on performance. Third, the study sheds light on some detailed but relevant aspects of this phenomenon by analyzing the breakdown of the ESG profile of infrastructure funds into four sustainability sub-scores capturing their efforts to reduce CO2 emissions, the use of polluting materials and to influence local communities as well their exposure to the risk of litigation due to the occurrence of ESG controversies. This study addresses the extent to which the adoption of ESG investment policies by the infrastructure funds have an impact on their performances.

Details

Managerial Finance, vol. 50 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 29 November 2023

Huthaifa Alqaralleh

This study explores the interconnectedness and complexity of risk-varied climate initiatives such as green bonds (GBs), emissions trading systems (ETS) and socially responsible…

116

Abstract

Purpose

This study explores the interconnectedness and complexity of risk-varied climate initiatives such as green bonds (GBs), emissions trading systems (ETS) and socially responsible investments (SRI). The analysis covers the period from September 2011 to August 2022, using six indices: three representing climate initiatives and three indicating uncertainty.

Design/methodology/approach

To achieve this, the study first examines dynamic lead-lag relations and correlation patterns in the time-frequency domain to analyse the returns of the series. Additionally, it applies an innovative approach to investigate the predictability of uncertainty measurements of climate initiatives across various market conditions and frequency spillovers in the short, medium and long run.

Findings

The findings indicate changing relationships between the series, increased linkages during turbulent market periods and strong co-movements within the network. The ETS is recommended for diversification and hedging against uncertainty indices, whereas the GB may be suitable for long-term diversification.

Practical implications

This study highlights the role of climate initiatives as potential hedges and contagion amplifiers during crises, with implications for policy recommendations and the asymmetric effects on market connectedness.

Originality/value

The paper answers questions that previous studies have not and contributes to the literature regarding financial risk management and social responsibility.

Details

The Journal of Risk Finance, vol. 25 no. 1
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 14 December 2021

Yann Ferrat, Frédéric Daty and Radu Burlacu

The growth of socially responsible assets has been exponential over the last decade, they now account for almost a third of professional investments. As the growth persists, faith…

1083

Abstract

Purpose

The growth of socially responsible assets has been exponential over the last decade, they now account for almost a third of professional investments. As the growth persists, faith and conviction investors reshape the equity markets. To fully comprehend the impact of socially conscious participants on security returns, this paper attempts to provide insights on how responsible investment growth has impacted the returns of sustainable stocks. The examination is split by investment horizon to account for short and long effects.

Design/methodology/approach

Using an exclusive dataset of non-financial ratings, provided by MSCI ESG research, the authors examine the cross-sectional returns of US and European sustainability-leading and lagging corporations between 2007 and 2019. Panel models robust to country, firm-year and industry effects were then employed to examine the impact of responsible investment growth on future stock returns.

Findings

The authors find evidence that the impact of responsible investment growth is dual contingent upon the timeframe considered. In the short run, sustainability-leading and lagging firms display similar stock returns. However, the spread in returns is negative over long horizons and increasing over time.

Originality/value

The examination performed in this study highlights the significant effect of responsible investment growth on future stock returns. Overall, the authors’ findings are consistent with the price pressure hypothesis in the short run and the cost of capital alteration over longer horizons.

Details

The Journal of Risk Finance, vol. 23 no. 1
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 17 May 2022

Phung Thanh Quang and Doan Phuong Thao

The need to improve energy efficiency as an essential factor for achieving the Sustainable Development Goals (SDGs) through green financing is one of the most important issues…

1263

Abstract

Purpose

The need to improve energy efficiency as an essential factor for achieving the Sustainable Development Goals (SDGs) through green financing is one of the most important issues worldwide. It is even more important for ASEAN (Association of Southeast Asian Nations) countries because of their potential for economic growth and the challenge of their environmental problems. This paper therefore addresses the question of whether and how green finance (with the proxy of issued green bonds [GBs]) promotes energy efficiency (with the proxy of energy intensity) in the ASEAN member countries.

Design/methodology/approach

The paper runs a two-stage generalized method of moments (GMM) system model for the quarterly data over the period 2017–2020. It also uses a linear interaction model to explore how the pandemic may affect the relationship between green finance and energy efficiency in this region.

Findings

The main results only demonstrate the short-term negative impact of GBs on energy intensity. Furthermore, per capita income, economic integration and renewable energy supply can be used as potential variables to reduce energy intensity, while modernization in ASEAN increases energy intensity. Establishment of digital green finance, long-term planning of a green finance market, trade liberalization and policies to mitigate the negative impacts of COVID-19 are recommended as golden policy implications.

Research limitations/implications

The present study has several limitations. First, it accounts for explanatory variables by following a number of previous studies. This may lead to omissions or errors. Second, the empirical estimates were conducted for 160 observations due to the repositioning of GBs in ASEAN, which is not bad but not good for an empirical study.

Originality/value

To the best of authors' knowledge, there has not been any in-depth study focusing on the relationship between energy efficiency and green financing for the case of ASEAN economies.

Details

The Journal of Risk Finance, vol. 23 no. 4
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 2 September 2021

Roy Abrams, Seungmin Han and Mehdi Tanzeeb Hossain

This paper aims to investigate the relationship between environmental performance and management and company valuation. With a specific focus on company valuation, this study…

Abstract

Purpose

This paper aims to investigate the relationship between environmental performance and management and company valuation. With a specific focus on company valuation, this study shows how a firm’s environmental activities, including its environmental management practices, are perceived and valued by its stockholders.

Design/methodology/approach

Newsweek’s green ranking data between 2014 and 2016 were used to support this analysis. Environmental performances and environmental management practices of 345 Fortune 500 companies from various industries were included in the data set.

Findings

The analysis finds higher valuations for US companies that are more efficient in managing greenhouse gas emissions. In addition, it empirically shows that investors place a higher value on companies with the following environment-related management policies: initiatives that reward top management for achieving environmental goals and third-party auditing of environmental performance.

Originality/value

By incorporating corporate environmental management practices as an additional environmental performance criterion, this research fills a gap in the literature on the potential relationship between corporate environmental performance and company valuation.

Details

Journal of Global Responsibility, vol. 12 no. 4
Type: Research Article
ISSN: 2041-2568

Keywords

Article
Publication date: 23 February 2022

Sitara Karim and Muhammad Abubakr Naeem

This study aims to examine the connectedness among green, Islamic and conventional financial markets from December 2008 to May 2021. Moreover, the impact of global factors on the…

Abstract

Purpose

This study aims to examine the connectedness among green, Islamic and conventional financial markets from December 2008 to May 2021. Moreover, the impact of global factors on the connectedness of given financial markets is also observed.

Design/methodology/approach

This study first employed the time-varying parameter vector autoregressions (TVP-VAR) technique to explore the connectedness of markets. Second, This study utilized the wavelet coherence analysis to test the time-frequency impact of global factors in terms of implied volatilities of stock, oil, gold, currency and bond on the connectedness across financial markets.

Findings

This study finds Islamic stocks, sustainability index and S&P500 composite index are the net transmitters, whereas Sukuk, commodity index, bond market, clean energy and green bonds are the net recipient of spillovers. Time-varying features of green, Islamic and conventional financial markets are evident in system-wide connectedness. This study further evidenced that global factors drive the connectedness of financial markets, particularly during stressful times.

Practical implications

The findings of this study furnish significant implications for policymakers, regulatory authorities, investors, financial market participants and portfolio managers in terms of carefully assessing the unique characteristics offered by each financial market in terms of risk mitigation and diversifying the portfolios.

Originality/value

Using a portfolio of green, Islamic and conventional financial markets, the uniqueness of this study lies in the examination of the connectedness of these markets by deploying the TVP-VAR technique. In addition, wavelet analysis offers a significant contribution in terms of global factors driving the connectedness of green, Islamic and conventional markets.

Details

International Journal of Managerial Finance, vol. 18 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 6 July 2015

Michael Rogers, Thomas Pfaff, Jason Hamilton and Ali Erkan

The purpose of this paper is to report on the Multidisciplinary Sustainability Education Project (MSEP) as a framework using sustainability-themed education modules to introduce…

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Abstract

Purpose

The purpose of this paper is to report on the Multidisciplinary Sustainability Education Project (MSEP) as a framework using sustainability-themed education modules to introduce students to the need for multidisciplinary approaches to solving twenty-first-century problems while retaining traditional course strengths and content.

Design/methodology/approach

The MSEP uses sustainability-themed education models and a multidisciplinary approach to link courses across disciplines. Modules are identified by an overarching question with activities designed to address the overarching question from course-specific perspectives, resulting in students writing short technical reports summarizing their results. Students then read and evaluate technical reports from other classes, and complete a summary activity designed to connect perspectives from different disciplines.

Findings

The multi-method assessment identified no loss or gain in discipline-specific learning; increased understanding about the characteristics of twenty-first-century problems, in particular those related to sustainability; and increased students ' favorable perceptions of introductory calculus. Assessment of increased understanding of how different disciplines can work together to understand complex problems was difficult to measure due to limitations of a project-developed assessment instrument.

Originality/value

This paper contributes to undergraduate sustainability education by describing a framework for connecting courses using sustainability-themed modules. By implementing an asynchronous manner where courses use materials from the project Web site and contribute materials to the Web site after implementing a module, it is easy to incorporate a module into existing courses, any educational institution’s existing structure and across institutions. The framework’s flexible design allows new courses from any discipline to connect to a module, allowing for multidisciplinary connections to grow over time.

Details

International Journal of Sustainability in Higher Education, vol. 16 no. 4
Type: Research Article
ISSN: 1467-6370

Keywords

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