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Social responsible mutual funds and lowcarbon economy

Author

Listed:
  • Amparo Soler-Domínguez

    (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain)

  • Juan Carlos Matallín-Sáez

    (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain)

  • Diego Víctor de Mingo-López

    (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain)

  • Emili Tortosa-Ausina

    (IVIE and Department of Economics, Universitat Jaume I, Castellón, Spain)

Abstract

Sustainable investment responds to claims for carbon and climate-neutral societies. To addresses the urgency around climate change and provide more qualified information to investors, Morningstar has developed the Low Carbon Designation (LCD), an indicator that the companies held in a portfolio are in general alignment with the transition to a low-carbon economy. It is assigned to portfolios that have low carbon-risk and fossil-fuel exposure scores. This study takes this a step further by examining the relationship between these scores and financial performance. With this aim, we analyze 3,920 socially responsible mutual funds in the world. Results show differences in financial performance, according scores and investment areas. We find evidence that funds characterized with higher levels of sustainability achieved better performance than funds more exposed to carbon and fossil fuel involved companies. Therefore we provide insights on the informativeness of these new scores for fund selection by investors, for a fairer comparison between socially responsible and conventional funds -since that sustainability improves performance- and for developing low carbon economies.

Suggested Citation

  • Amparo Soler-Domínguez & Juan Carlos Matallín-Sáez & Diego Víctor de Mingo-López & Emili Tortosa-Ausina, 2020. "Social responsible mutual funds and lowcarbon economy," Working Papers 2020/15, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2020/15
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    References listed on IDEAS

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    More about this item

    Keywords

    environmental; low-carbon; mutual fund; performance; sustainability;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G2 - Financial Economics - - Financial Institutions and Services
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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