Does Sustainability Score Impact Mutual Fund Performance?
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Departamento de Organización de Empresas y Comercialización, Universidad de Santiago de Compostela, 27002 Lugo, Spain
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Departamento de Economía Financiera y Contabilidad, Universidad de Santiago de Compostela, 15782 Santiago de Compostela, Spain
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Departamento de Economia, Finanças e Contabilidade, Instituto Politécnico de Viana do Castelo, 900-347 Viana do Castelo, Portugal
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Departamento de Fundamentos del Análisis Económico, Universidad de Santiago de Compostela, 15782 Santiago de Compostela, Spain
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Sustainability 2019, 11(10), 2972; https://doi.org/10.3390/su11102972
Received: 2 April 2019 / Revised: 11 May 2019 / Accepted: 21 May 2019 / Published: 24 May 2019
(This article belongs to the Special Issue New Trends in Finance and Investment Related to Sustainability)
Given that sustainable investing constitutes a major force across global financial markets, in 2016 Morningstar began reporting Morningstar Sustainability scores. We used the 2016, 2017 and 2018 scores to study the effects of socially responsible investments (SRI) on European equity fund performance. Sustainability scores impacted positively on performance, which was consistent with the idea that the mutual funds invested in companies with better scores generate better risk-adjusted and not-risk adjusted performance. We also tested the relation on mutual fund flows and risk. The sustainability score in the previous year is significant on the flows, so higher-rated funds receive a larger volume of funds. In terms of risk, the level of sustainability is negatively related to the value at risk (VaR) of the fund, supporting that higher scored mutual funds offer better protection against extreme losses.
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Keywords:
mutual fund performance; mutual fund flows; Sustainability Score; ESG score; Socially Responsible Investment; SRI
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
MDPI and ACS Style
Durán-Santomil, P.; Otero-González, L.; Correia-Domingues, R.H.; Reboredo, J.C. Does Sustainability Score Impact Mutual Fund Performance? Sustainability 2019, 11, 2972. https://doi.org/10.3390/su11102972
AMA Style
Durán-Santomil P, Otero-González L, Correia-Domingues RH, Reboredo JC. Does Sustainability Score Impact Mutual Fund Performance? Sustainability. 2019; 11(10):2972. https://doi.org/10.3390/su11102972
Chicago/Turabian StyleDurán-Santomil, Pablo, Luis Otero-González, Renato H. Correia-Domingues, and Juan C. Reboredo 2019. "Does Sustainability Score Impact Mutual Fund Performance?" Sustainability 11, no. 10: 2972. https://doi.org/10.3390/su11102972
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