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Can robo advisors expedite carbon transitions? Evidence from automated funds

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  • Shan, Shan
  • Umar, Muhammad
  • Mirza, Nawazish

Abstract

When it comes to making comparisons with traditional funds, it has been observed that Robo advisers have emerged as a viable alternative that imposes a substantially lesser load on the investors. As a result, they are capable of playing a crucial role in supporting low-carbon transitions - a phenomenon that has never been investigated prior to this. In this study, we assess the performance of automated funds, after categorizing them into different groups, based on their investment exposure to carbon-emitting enterprises. Our findings reveal that automated funds that invest in low-carbon funds tend to outperform their competitors. Moreover, when we compare the absolute returns, the return to value at risk, the adjusted Sharpe ratio, and Jensen's alpha, these results remain consistent. In addition to this, we also found that Robo funds with less exposure to polluting companies have better market timing. Therefore, we conclude that these technology-enabled investment vehicles can help with low-carbon transitions and are instrumental in achieving sustainable development goals.

Suggested Citation

  • Shan, Shan & Umar, Muhammad & Mirza, Nawazish, 2022. "Can robo advisors expedite carbon transitions? Evidence from automated funds," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    • Handle: RePEc:eee:tefoso:v:180:y:2022:i:c:s0040162522002219
    DOI: 10.1016/j.techfore.2022.121694
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    References listed on IDEAS

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    Cited by:

    1. Lang, Qiaoqi & Ma, Feng & Mirza, Nawazish & Umar, Muhammad, 2023. "The interaction of climate risk and bank liquidity: An emerging market perspective for transitions to low carbon energy," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    2. Umar, Muhammad & Mirza, Nawazish & Hasnaoui, Jamila Abaidi & Rochoń, Małgorzata Porada, 2022. "The nexus of carbon emissions, oil price volatility, and human capital efficiency," Resources Policy, Elsevier, vol. 78(C).
    3. Umar, Muhammad & Mirza, Nawazish & Ribeiro-Navarrete, Samuel, 2023. "The impact of financial restatements on sell-side recommendation accuracy," Finance Research Letters, Elsevier, vol. 55(PA).
    4. Shan, Shan & Mirza, Nawazish & Umar, Muhammad & Hasnaoui, Amir, 2023. "The nexus of sustainable development, blue financing, digitalization, and financial intermediation," Technological Forecasting and Social Change, Elsevier, vol. 195(C).

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    More about this item

    Keywords

    Carbon transitions; Robo advisors; Technological Investments;
    All these keywords.

    JEL classification:

    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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