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European Green Mutual Fund Performance: A Comparative Analysis with their Conventional and Black Peers

Author

Listed:
  • Gbenga Ibikunle

    (University of Edinburgh Business School
    University of St Andrews
    Fondazione European Capital Markets Cooperative Research Centre (ECMCRC))

  • Tom Steffen

    (University of Edinburgh
    Macquarie University
    Capital Markets Cooperative Research Centre (CMCRC))

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.

Suggested Citation

  • Gbenga Ibikunle & Tom Steffen, 2017. "European Green Mutual Fund Performance: A Comparative Analysis with their Conventional and Black Peers," Journal of Business Ethics, Springer, vol. 145(2), pages 337-355, October.
    • Handle: RePEc:kap:jbuset:v:145:y:2017:i:2:d:10.1007_s10551-015-2850-7
    DOI: 10.1007/s10551-015-2850-7
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    More about this item

    Keywords

    Green mutual funds; Black mutual funds; Conventional mutual funds; Socially responsible investments; Risk-adjusted returns;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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