IDEAS home Printed from https://ideas.repec.org/a/eee/renene/v143y2019icp1299-1309.html
   My bibliography  Save this article

Do European renewable energy mutual funds foster the transition to a low-carbon economy?

Author

Listed:
  • Martí-Ballester, Carmen-Pilar

Abstract

Economic growth and development around the world are leading to increasing worldwide demand for energy, whose production still mainly comes from fossil fuels generating large amounts of greenhouse gas emissions, which contribute to global warming and climate change. To mitigate climate change, the European Union implemented an energy policy strategy that encourages firms to implement sustainable energy systems. This could generate investment opportunities in energy efficiency and renewable energy projects around the world for European mutual funds. Therefore, the main aim of this paper is to analyze the financial performance of energy and renewable energy mutual funds using conditional and unconditional models. To this end, we have a sample of 4496 mutual funds commercialized in Europe in the period 2007–2018. Our results indicate that renewable energy mutual funds perform similarly to the market using conditional models. However, they underperform their conventional peers using a specialized market benchmark, reaching similar performance to black energy funds. While the total expense ratio negatively affects renewable energy financial performance, other fund characteristics, such as size or Socially Responsible Investing (SRI) certification, do not affect it.

Suggested Citation

  • Martí-Ballester, Carmen-Pilar, 2019. "Do European renewable energy mutual funds foster the transition to a low-carbon economy?," Renewable Energy, Elsevier, vol. 143(C), pages 1299-1309.
    • Handle: RePEc:eee:renene:v:143:y:2019:i:c:p:1299-1309
    DOI: 10.1016/j.renene.2019.05.095
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0960148119307682
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.renene.2019.05.095?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yan, Xuemin (Sterling), 2008. "Liquidity, Investment Style, and the Relation between Fund Size and Fund Performance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(3), pages 741-767, September.
    2. Gupta, Kartick, 2017. "Do economic and societal factors influence the financial performance of alternative energy firms?," Energy Economics, Elsevier, vol. 65(C), pages 172-182.
    3. Burgherr, Peter & Hirschberg, Stefan, 2014. "Comparative risk assessment of severe accidents in the energy sector," Energy Policy, Elsevier, vol. 74(S1), pages 45-56.
    4. Mette Talseth Solnørdal & Lene Foss, 2018. "Closing the Energy Efficiency Gap—A Systematic Review of Empirical Articles on Drivers to Energy Efficiency in Manufacturing Firms," Energies, MDPI, vol. 11(3), pages 1-30, February.
    5. Christophe Revelli & Jean-Laurent Viviani, 2015. "Financial performance of socially responsible investing (SRI): what have we learned? A meta-analysis," Post-Print halshs-01141295, HAL.
    6. Milton Friedman, 1971. "A Theoretical Framework for Monetary Analysis," NBER Books, National Bureau of Economic Research, Inc, number frie71-1, March.
    7. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    8. Vidal-García, Javier & Vidal, Marta & Boubaker, Sabri & Uddin, Gazi Salah, 2016. "The short-term persistence of international mutual fund performance," Economic Modelling, Elsevier, vol. 52(PB), pages 926-938.
    9. Apriani Soepardi & Pratikto Pratikto & Purnomo Budi Santoso & Ishardita Pambudi Tama & Patrik Thollander, 2018. "Linking of Barriers to Energy Efficiency Improvement in Indonesia’s Steel Industry," Energies, MDPI, vol. 11(1), pages 1-22, January.
    10. Leite, Paulo & Cortez, Maria Céu, 2014. "Style and performance of international socially responsible funds in Europe," Research in International Business and Finance, Elsevier, vol. 30(C), pages 248-267.
    11. Daniel Hoechle, 2007. "Robust standard errors for panel regressions with cross-sectional dependence," Stata Journal, StataCorp LP, vol. 7(3), pages 281-312, September.
    12. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
    13. Belghitar, Yacine & Clark, Ephraim & Deshmukh, Nitin, 2014. "Does it pay to be ethical? Evidence from the FTSE4Good," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 54-62.
    14. Michael E. Porter, 1991. "Towards a dynamic theory of strategy," Strategic Management Journal, Wiley Blackwell, vol. 12(S2), pages 95-117, December.
    15. Miguel A. Ferreira & Aneel Keswani & António F. Miguel & Sofia B. Ramos, 2013. "The Determinants of Mutual Fund Performance: A Cross-Country Study," Review of Finance, European Finance Association, vol. 17(2), pages 483-525.
    16. Wen, Xiaoqian & Guo, Yanfeng & Wei, Yu & Huang, Dengshi, 2014. "How do the stock prices of new energy and fossil fuel companies correlate? Evidence from China," Energy Economics, Elsevier, vol. 41(C), pages 63-75.
    17. Paramati, Sudharshan Reddy & Sinha, Avik & Dogan, Eyup, 2017. "The significance of renewable energy use for economic output and environmental protection: Evidence from the next 11 developing economies," MPRA Paper 100087, University Library of Munich, Germany.
    18. 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.
    19. Andor, Mark & Voss, Achim, 2016. "Optimal renewable-energy promotion: Capacity subsidies vs. generation subsidies," Resource and Energy Economics, Elsevier, vol. 45(C), pages 144-158.
    20. Reboredo, Juan C., 2015. "Is there dependence and systemic risk between oil and renewable energy stock prices?," Energy Economics, Elsevier, vol. 48(C), pages 32-45.
    21. Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
    22. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    23. Galema, Rients & Plantinga, Auke & Scholtens, Bert, 2008. "The stocks at stake: Return and risk in socially responsible investment," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2646-2654, December.
    24. Fernando Muñoz & Maria Vargas & Isabel Marco, 2014. "Environmental Mutual Funds: Financial Performance and Managerial Abilities," Journal of Business Ethics, Springer, vol. 124(4), pages 551-569, November.
    25. Reboredo, Juan C. & Quintela, Miguel & Otero, Luis A., 2017. "Do investors pay a premium for going green? Evidence from alternative energy mutual funds," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 512-520.
    26. Ferson, Wayne E & Schadt, Rudi W, 1996. "Measuring Fund Strategy and Performance in Changing Economic Conditions," Journal of Finance, American Finance Association, vol. 51(2), pages 425-461, June.
    27. Christopherson, Jon A & Ferson, Wayne E & Glassman, Debra A, 1998. "Conditioning Manager Alphas on Economic Information: Another Look at the Persistence of Performance," The Review of Financial Studies, Society for Financial Studies, vol. 11(1), pages 111-142.
    28. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    29. Nofsinger, John & Varma, Abhishek, 2014. "Socially responsible funds and market crises," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 180-193.
    30. Bobinaite, Viktorija & Tarvydas, Dalius, 2014. "Financing instruments and channels for the increasing production and consumption of renewable energy: Lithuanian case," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 259-276.
    31. Haiqing Hu & Chun-Ping Chang & Minyi Dong & Wei-Na Meng & Yu Hao, 2018. "Does environmental information disclosure affect the performance of energy-intensive firms’ borrowing ability? Evidence from China," Energy & Environment, , vol. 29(5), pages 685-705, August.
    32. Nicolas P. B. Bollen & Jeffrey A. Busse, 2001. "On the Timing Ability of Mutual Fund Managers," Journal of Finance, American Finance Association, vol. 56(3), pages 1075-1094, June.
    33. Francisco Climent & Pilar Soriano, 2011. "Green and Good? The Investment Performance of US Environmental Mutual Funds," Journal of Business Ethics, Springer, vol. 103(2), pages 275-287, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gbenga Ibikunle & Carmen‐Pilar Martí‐Ballester, 2022. "Can water mutual funds aid sustainable development?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1173-1190, January.
    2. Carmen‐Pilar Marti‐Ballester, 2019. "The role of mutual funds in the sustainable energy sector," Business Strategy and the Environment, Wiley Blackwell, vol. 28(6), pages 1107-1120, September.
    3. Cortez, Maria Céu & Andrade, Nuno & Silva, Florinda, 2022. "The environmental and financial performance of green energy investments: European evidence," Ecological Economics, Elsevier, vol. 197(C).
    4. Luis Ferruz & Fernando Muñoz & María Vargas, 2012. "Managerial Abilities: Evidence from Religious Mutual Fund Managers," Journal of Business Ethics, Springer, vol. 105(4), pages 503-517, February.
    5. Reboredo, Juan C. & Quintela, Miguel & Otero, Luis A., 2017. "Do investors pay a premium for going green? Evidence from alternative energy mutual funds," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 512-520.
    6. Leite, Paulo & Cortez, Maria Céu, 2015. "Performance of European socially responsible funds during market crises: Evidence from France," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 132-141.
    7. Carmen-Pilar Martí-Ballester, 2020. "Financial Performance of SDG Mutual Funds Focused on Biotechnology and Healthcare Sectors," Sustainability, MDPI, vol. 12(5), pages 1-15, March.
    8. Azmi, Wajahat & Mohamad, Shamsher & Shah, Mohamed Eskandar, 2020. "Ethical investments and financial performance: An international evidence," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    9. Naqvi, Bushra & Mirza, Nawazish & Rizvi, Syed Kumail Abbas & Porada-Rochoń, Małgorzata & Itani, Rania, 2021. "Is there a green fund premium? Evidence from twenty seven emerging markets," Global Finance Journal, Elsevier, vol. 50(C).
    10. Łukasz Dopierała & Magdalena Mosionek-Schweda & Daria Ilczuk, 2020. "Does the Asset Allocation Policy Affect the Performance of Climate-Themed Funds? Empirical Evidence from the Scandinavian Mutual Funds Market," Sustainability, MDPI, vol. 12(2), pages 1-23, January.
    11. Juan Carlos Matallín-Sáez & Amparo Soler-Domínguez & Emili Tortosa-Ausina, 2016. "Ethical strategy focus and mutual fund management: performance and persistence," Working Papers 2016/01, Economics Department, Universitat Jaume I, Castellón (Spain).
    12. Wolfgang Bessler & Thomas Conlon & Diego Víctor de Mingo‐López & Juan Carlos Matallín‐Sáez, 2022. "Mutual fund performance and changes in factor exposure," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(1), pages 17-52, March.
    13. Fernando Mu�oz & Ruth Vicente & Luis Ferruz, 2015. "Stock-picking and style-timing abilities: a comparative analysis of conventional and socially responsible mutual funds in the US market," Quantitative Finance, Taylor & Francis Journals, vol. 15(2), pages 345-358, February.
    14. Leite, Paulo & Cortez, Maria Céu, 2014. "Style and performance of international socially responsible funds in Europe," Research in International Business and Finance, Elsevier, vol. 30(C), pages 248-267.
    15. Hoechle, Daniel & Schmid, Markus & Zimmermann, Heinz, 2012. "Decomposing Performance," Working Papers on Finance 1216, University of St. Gallen, School of Finance, revised Nov 2015.
    16. Helen Chiappini & Gianfranco Vento & Leonardo De Palma, 2021. "The Impact of COVID-19 Lockdowns on Sustainable Indexes," Sustainability, MDPI, vol. 13(4), pages 1-18, February.
    17. Cuthbertson, Keith & Nitzsche, Dirk, 2013. "Performance, stock selection and market timing of the German equity mutual fund industry," Journal of Empirical Finance, Elsevier, vol. 21(C), pages 86-101.
    18. Amparo Soler‐Domínguez & Juan Carlos Matallín‐Sáez & Diego Víctor de Mingo‐López & Emili Tortosa‐Ausina, 2021. "Looking for sustainable development: Socially responsible mutual funds and the low‐carbon economy," Business Strategy and the Environment, Wiley Blackwell, vol. 30(4), pages 1751-1766, May.
    19. Alda, Mercedes, 2017. "The abilities of managers in UK pension funds. Are socially responsible managers superior?," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    20. Federica Ielasi & Monica Rossolini, 2019. "Responsible or Thematic? The True Nature of Sustainability-Themed Mutual Funds," Sustainability, MDPI, vol. 11(12), pages 1-17, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:renene:v:143:y:2019:i:c:p:1299-1309. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/renewable-energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.