Performance of Swedish sustainable equity funds during Covid-19 : a comparative study on sustainable and conventional equity funds

University essay from SLU/Dept. of Economics

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.

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