The role of mutual funds in the sustainable energy sector

The integration of renewable energy criteria in mutual fund investment decisions could channel private resources into the funding of environmentally related projects implemented by firms contributing to sustainable development. This paper examines the performance of European renewable energy funds t...

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Bibliographic Details
Published in:Business strategy and the environment 2019-09, Vol.28 (6), p.1107-1120
Main Author: Marti‐Ballester, Carmen‐Pilar
Format: Article
Language:English
Subjects:
Alternative energy
Benchmarks
black energy funds
Clean energy
conventional funds
Energy efficiency
Energy industry
Energy technology
Fossil fuels
Funds
Investment
Investments
Markets
Mutual funds
performance evaluation
Renewable energy
renewable energy funds
renewable energy screening
Renewable energy technologies
Renewable resources
Sustainability
Sustainable development
Sustainable energy
Technology
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Summary:The integration of renewable energy criteria in mutual fund investment decisions could channel private resources into the funding of environmentally related projects implemented by firms contributing to sustainable development. This paper examines the performance of European renewable energy funds that invest globally by comparing their risk‐adjusted returns with those achieved by black energy and conventional mutual funds. It uses Carhart's model on a sample of 81 renewable energy funds, 125 black energy funds, and 4,337 conventional mutual funds. The results indicate that 32.1% of renewable mutual funds—most of which adopt energy producers, renewable energy technology, and energy efficiency‐focused criteria—perform significantly better than the S&P Clean Energy market benchmark, this percentage being affected by the different states of the economy. However, none of them are able to beat the fossil fuel energy (S&P Global 1200 Energy Index) or conventional market benchmarks (S&P Global 1200 Index). Furthermore, 37.04% of renewable energy funds significantly underperform the S&P Global 1200 benchmark. Therefore, the investment in renewable energy funds has a financial cost for investors in relation to conventional fund investors.
ISSN:0964-4733
1099-0836
DOI:10.1002/bse.2305