Epsilon Archive for Student Projects

Abstract

This study investigates whether sustainable funds exhibit significantly different fees and returns compared to their unsustainable counterparts, and whether a "sustainability premium" can be identified. Employing regression analysis, the research examines the relationship between sustainability and fund fees, as well as sustainability and fund returns. The results show that the sustainability variable had no significant impact on fund fees. However, the regression analysis of fund returns presents mixed results. In two out of three models the sustainability variable had a statistically significant impact on funds three-year returns but it is important to know that all models are deemed relatively unreliable. However, the results of this study do not provide clear support for the existence of a "sustainability premium". The absence of significant differences in fees and the mixed findings concerning returns suggest that investors are not consistently paying a premium for sustainable funds. The study identifies several limitations, including reliance on data from specific platforms, small sample size, short time horizon and potential non-linear relationships between variables. Future research should explore alternative methodologies when investigating the impact of sustainability on fund performance, using different time horizons and larger sample sizes while taking into account non-linear relationships between variables.