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What does ESG risk premia tell us about mutual fund sustainability levels: A difference-in-differences analysis

Author

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  • Dunbar, Kwamie
  • Treku, Daniel
  • Sarnie, Robert
  • Hoover, Jack

Abstract

This study evaluates the importance of environmental, social, and governance (ESG) considerations in mutual fund performance using difference-in-differences (DID) analysis on a selection of repurposed ESG mutual funds. DID showed that ESG funds outperformed non-ESG funds during the post-transformation period. Outperformance ranged from 0.02 to 0.13%. Further, ESG risk premiums were major ESG information transmitters in mutual fund markets. Finally, ESG risk should be part of a broader consideration of portfolio risk.

Suggested Citation

  • Dunbar, Kwamie & Treku, Daniel & Sarnie, Robert & Hoover, Jack, 2023. "What does ESG risk premia tell us about mutual fund sustainability levels: A difference-in-differences analysis," Finance Research Letters, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:finlet:v:57:y:2023:i:c:s1544612323006347
    DOI: 10.1016/j.frl.2023.104262
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    More about this item

    Keywords

    Environmental; social and governance; Repurposed mutual funds; Difference-in-differences analysis; Socially responsible investing;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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