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Carbon-intensive industries in Socially Responsible mutual funds' portfolios

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  • Muñoz, Fernando

Abstract

In this research, I study the exposure of Socially Responsible mutual funds (SR) to black industries (i.e., carbon-intensive sectors: fossil fuel, metal and utilities) and its effect on the financial performance. To this purpose, I analyze the industry portfolio allocation of a sample of 136 actively-managed US SR mutual funds, investing in domestic and global equity, in the period January 2012–December 2018. I observe that the average weight of black industries in these portfolios is 9.51% falling over time (13.45% in 2012 versus 7.40% in 2018). Another finding is that a greater exposure to fossil fuel and metal industries negatively impacts the portfolios' financial performance. In addition, SR funds managed by firms located in Republican-leaning states and in states with greater CO2 emissions per capita, are more exposed to carbon-intensive industries, suggesting that SR funds' managers could be influenced by local factors when making their investment decisions. Finally, I observe that SR funds marketed under “low-carbon” labels live up to their name and are less exposed to fossil fuel and metal industries than other types of SR funds.

Suggested Citation

  • Muñoz, Fernando, 2021. "Carbon-intensive industries in Socially Responsible mutual funds' portfolios," International Review of Financial Analysis, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finana:v:75:y:2021:i:c:s1057521921000831
    DOI: 10.1016/j.irfa.2021.101740
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