En Performancemåling af Etiske Investeringsforeninger som investerer i Emerging Markets, Europa eller Globalt

Christian Bache Vognbjerg

Student thesis: Master thesis


Since the financial crisis Environmental, Social and Governance (ESG) investments has experienced an enormous growth, both in terms of asset under management and number of funds. However, many in the industry are skeptical about the concept. They are of the opinion that implementing ESG in the investment process decrease the investment universe and has a negative impact on diversification, which according to economic theory have a negative impact in terms of higher risk and lower expected return. In contrast, proponents consider ESG as a tool to improve long-term return. They believe that implementing ESG lead to a positive impact on tail risks, and therefore reduce the risk of extreme events within the portfolio holdings. With these different opinions in mind, I find the concept interesting for further investigation. Therefore, this master thesis studies the performance of Ethical- vs. Conventional mutual funds in the period June 2005 to April 2015. The framework of the analysis is 211 Ethical mutual funds and 422 conventional Mutual funds that invest in Emerging (21)-, Europe (52) and Global Market (138) equities. To improve the comparability between the Ethical- and conventional funds I have chosen a matched pair approach where the matching criteria’s are fund age, investment strategy, and investment universe and management fees. MSCI Indices are used as market- and factor proxies. Furthermore, the geographical allocation of the regional MSCI indices are used as weights when calculating the risk free rate for the three markets. The performance measures used in the study is the Sharpe Ratio, Treynor Ratio, Jensen Alpha and the Fama and French 3-Factor model. For the entire period of analysis, the results indicate, with statistically evidence, that the Ethical mutual funds in Emerging Markets and Europe has outperformed its counterpart. Whereas, the conventional mutual funds in the Global Market has outperformed the Ethical with statistically evidence.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2015
Number of pages127