Epsilon Archive for Student Projects

Abstract

The interest for sustainable equity funds has increased globally and especially in Sweden the last
years. The Swedish and Scandinavian fund markets have grown to be seen as frontrunners for
sustainable investments. The growing interest for sustainable funds comes from concerns linked to
the global warming, and how companies work with questions within corporate social responsibility
and factors within environmental, social and governance. The environmental factor is linked to the
production and how much greenhouse gas emissions the company releases. The social factor is how
the company treats its employees and the society around the company. The governance factor is how
the company works against bribery and corruption. This growing interest for sustainable funds
among investors, generates questions how sustainable funds differs from conventional funds in risk�adjusted return during recessions and crises. This thesis focuses on the difference in risk-adjusted
return between sustainable and conventional funds during the year of 2020, with the Covid-19
financial crisis in mind.
To examine how the risk-adjusted return differed, 20 funds were selected for examination. Ten funds
with high sustainability rating, and ten funds with low sustainability rating. To evaluate the
performance of the funds, the risk-adjusted return was calculated through three types of
measurement models, the Sharpe ratio, the Treynor ratio and the Jensen’s alpha. The performance
of the funds was evaluated both for the full year, and for three sub-periods, to reflect different stages
of the Covid-19 financial crisis. The findings of the study are that for the full year period, the
sustainable funds performed higher risk-adjusted return than the conventional funds. For the sub�periods, the sustainable funds performed higher risk-adjusted returns during all sub-periods except
in the second sub-period when calculating the Treynor ratio. For both the full sample period and for
the sub-periods, the results from the measurement models showed no statistically significant
difference. This means that private investors could have chosen either sustainable or conventional
funds during the Covid-19 financial crisis and have expected equal risk-adjusted return.