Ethical Investing: A Study of Performance

Anders Johan Rustestuen Traaseth & Ulrik Elstad Framstad

Student thesis: Master thesis


This thesis sets out to measure the effect of taking ethical considerations when investing. We analyze the effect over a period from January 2002, and throughout the first half of 2015, by first comparing the risk-adjusted performance of ethical mutual funds with conventional mutual funds, and by later examining the return on single stocks against a measure of ethical behavior. By applying well known models in financial theory we find no significant difference in performance between ethical and conventional mutual funds. However, weak evidence of a slight insignificant underperformance exists. When analyzing the stocks we find that companies with higher ESG-scores have slightly outperformed companies with lower ESG-scores, with the US data being statistically significant. We also find weak evidence indicating that negative screening contributes to a loss in return for ethical investors. We finally conclude that investors who invest ethically do not sacrifice return.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2016
Number of pages121