Green Mutual Funds Research Articles

Global Green Finance: Roadmap for India

Climate change, and especially, ‘climate deterioration’ is an alarming situation for the global scenario, and thus, the need for developing financial services and products that aim to reduce the effects of these changes is the need of the hour. This long-felt need has given birth to a new form of investing, known as green finance or broadly, sustainable finance. So, it can be said that green finance is a subset under the larger umbrella of the concept of sustainable finance. This article tries to bring to the knowledge of the readers the basic understanding of the concept of green finance, its various instruments available globally and its developments at the global and Indian level, highlighting the three stages of green finance’s evolution and its major theories. Further, it reveals the global presence of major green finance instruments like green bonds and its types, green mutual funds (MFs) and green stock exchanges. The article also deals with the concepts of emissions trading system and European Union’s Carbon Border Tax. The discussion becomes more specific in the subsequent sections, drawing the present picture of green finance concerning the Indian scenario—its green bank, green bonds, green MF and green stock exchange. Reserve Bank of India’s recent guidelines regarding green finance and India’s presidency at the last held G20 summit are also discussed, finally concluding with mapping the road ahead for India.

Conceptual foundations of the movement of innovative capital in conditions of priority development of the “green” economy

The article provides a justification for the process of forming the vector of development of the Green Economy, identifies the features of Green Investments in the modern economy. Green investment is the allocation of financial capital to projects or companies that focuses primarily on environmentally friendly technologies, sustainable practices, and natural resource conservation. The purpose of green investments is to develop the Green Economy, to support businesses that contribute to environmental protection while generating profits for investors. “Green investments play a crucial role in the transition to the Green Economy and are the basis for combating climate change and implementing sustainable development practices.The authors detail the factors of capital flows in the context of innovations in the Green Economy. External factors are political, geographical, social, and natural. The article characterizes market instruments of green investments. Among the market instruments, the following are identified: green bonds, green mutual funds, exchange-traded funds, green private equity and venture capital, impact investing, carbon credits and compensation. The authors determines the prospects for innovative green economy projects. It is determined that green investments have great potential for obtaining long-term economic, social and environmental benefits, in particular, reducing carbon emissions and increasing resource efficiency.

Climate change: role of banks and financial institutions in greening the banking system

Global warming and climate change are hot topics of environmentalists globally. The World Bank’s ‘Climate Change Action Plan’ for 2021 to 2025 explains the policies and programs to be implemented by banks and financial institutions to combat climate change. The UN and World Bank have taken actions towards achieving minimal carbon emissions that in turn reduce global warming. In India, national-level financial institutions such as RBI, NABARD, SIDBI and Exim Bank took the lead in formulating policies to achieve the goal of greening the banking system. SBI granted financial assistance for windmills and kick-started green financing activity, followed by all other banks. Financial assistance at the concessional interest rate to renewable energy and energy-efficient projects and buildings, electric vehicles, start-ups, trading green bonds and issues of green mutual funds are introduced by various banks. Additionally, within the bank, a sea change in the form green ATMs, digitalization of banking, issue of electronic bank statements and e-mail communication are started. Various other changes, such as green bank building, purchasing electric equipment conforming to green standards, changing LED lighting systems, conducting conferences and meetings electronically, etc., are implemented in the banks. Thus, both the internal changes within the bank and external changes address the issue of climate change. The study reveals that even though banks have taken the green initiatives a decade back, it is not widely popularized among customers and common people for a nationwide speedy adoption of green banking.

A Comparative Study of Financial Performance between Sustainable and Conventional Investment

Purpose: This study aims to examine the attractiveness of sustainable investments to investors and assess the potential disparity in returns between sustainable and conventional investment in Indonesia. It addresses the fundamental question of whether a statistically significant difference exists in the financial performance of these two investment types.
 Method: The study focused on evaluating the performance of green bonds, green equities, and green mutual funds, compared to conventional one between 2018 and 2023. Specifically, it involved a comparative analysis of the yields or return of both type of investment using an independent sample t-test.
 Result: The findings reveal that there is no statistically significant difference in the yield or return of sustainable and conventional investment instruments. While both categories demonstrate comparable profit potential, distinctions arise in terms of price volatility. This research contributes to the existing scientific literature on sustainable investing, providing valuable insights to investors in making well-informed decisions that encompass both environmental considerations and financial objectives.

Risk and Performance of European Green and Conventional Funds

This paper analyzes how the risk-adjusted returns of green funds compare to those of conventional funds, between the years 2005 and 2020 for the European Union countries. Additionally, we tested how the performance of green funds correlates to the business cycle, subdividing their performance through expansionary and recessionary times. The findings are summarized as follows: our regression results demonstrated green and conventional funds exhibiting negative abnormal adjusted-returns against the developed world market benchmark for the single-factor and multifactor models. For the European market benchmark, we found environmental mutual funds presenting a positive performance for both models and conventional funds displaying negative results for the single-factor model and positive results for the multifactor model. The factor loadings for green funds indicated a negative load on momentum, book-to-market (HML) and size (SMB) factors, revealing a higher exposure to big and value companies. Subsampling per business cycle exhibited green mutual funds providing higher risk-adjusted returns to investors during crisis periods and mixed results for the non-crisis periods.

Talking About the Weather: Availabilty, Affect and the Demand for Green Investments

Linking a nationally representative survey to individual pension data, we show how environmental fears, manifesting in extreme beliefs about future climate calamities, are associated with individual portfolio rebalancing decisions. Extreme weather conditions in Sweden in 2014 stoked fears of future environmental calamities, especially in those living closer to the catastrophes. After this heat wave, but not before, investors who fear climate-related catastrophes rebalanced their retirement portfolios towards green investments. This aligns with other behaviors: they also report that they recycle more than their neighbors, think green investments outperform, and are willing to pay higher fees for green mutual funds.

Do German Green Mutual Funds Perform Better Than Their Peers

Do German Green Mutual Funds Perform Better Than Their Peers

‘Green Investing’ as an Approach to Make ‘Green Bangladesh’: the Role of Stock Exchanges

Manufacturing various products and delivering numerous services have its respective impacts on the environment. Today, a range of eco-friendly economic instruments available worldwide, such as the eco-investment, green stocks, green investment, green banking, green bonds, green savings accounts, green mutual funds, green money market accounts and green certificates of deposit that have gained the positive reputation among many investors in the stock markets. Green investments are directed by corporations that invest in businesses committed to the environment. Some of these businesses either implement entire energy practices or good waste management systems. In the past, very few companies could have been called eco-friendly, along with several nations ensuring their support for the environment and creating environment-friendly policies, several companies have come forth with a clear objective of being responsive to the environment and lessen emissions. Bangladeshi mutual funds have not really presented much achievement in the green fund arena through the global counterparts is working in this sector. In this context, this paper intends to attract the attention of corporations towards green investments, which are effective for safe-environment and protection to earth. This paper focuses on various green investments and green investing companies in Bangladesh, and the primary focuses are: (1) to acquaint with nature of the companies involved in green funds and green investing, (2) to make an overview of different global green investing arrangements, (3) to suggest Bangladeshi companies to come forward in green investing to make Bangladesh green and pollution-free.

Measuring the environmental performance of green SRI funds: A DEA approach

In this paper, we tackle the issue of evaluating an important class of green investing that integrate classical financial tasks with some environmental issues: the so-called green mutual funds.In order to do this, we first propose three measures of environmental sustainability which may give financial agents information on the greenity of their investments. These alternative indicators could serve as an overall measure of environmental sustainability and overcome the drawback that limits the evaluation of green investments to the measurement of CO2 emissions while often more than one environmental aspects may be considered.Secondly, we propose some models aimed at evaluating the performance of green mutual funds by taking into account the proposed environmental measures as well as some classical financial indicators. The analysis is carried out in a Data Envelopment Analysis (DEA) framework, since DEA models can consider strategic non-financial objective measures in addition to traditional financial metrics in order to give a more balanced view of socially responsible investments (SRI). The presented models include indicators of environmental sustainability in different ways, either by penalizing a high environmental consumption or by rewarding an environmental saving entailed by a low consumption. The environmental measures and the models proposed are applied to a set of European green funds in the periods 2012–2015 and 2010–2015 to conduct an extensive analysis.

European Green Mutual Fund Performance: A Comparative Analysis with their Conventional and Black Peers

We conduct the first comparative analysis of the financial performance of European green, black (fossil energy and natural resource) and conventional mutual funds. Based on a unique dataset of 175 green, 259 black and 976 conventional mutual funds, the investigation contrasts the financial performance of the three dissimilar investment orientations over the 1991–2014 period. Over the full sample period, green mutual funds significantly underperform relative to conventional funds, while no significant risk-adjusted performance differences between green and black mutual funds could be established during the same period. Environmentally friendly investment vehicles display a significant exposure to small cap and growth stocks, while black funds are more exposed to value stocks. Remarkably, the green funds’ risk-adjusted return profile progressively improves over time until no difference in the performance of the green and the conventional classes could be discerned. Further evidence suggests that the green funds are beginning to significantly outperform their black peers, especially over the 2012–2014 investment window.

Do Green Investments Trick or Treat? A Quarter Century of Evidence from European Mutual Funds Performance

We conduct the first comparative analysis of the financial performance of European green, black (fossil energy and natural resource) and conventional mutual funds. Based on a unique dataset of 175 green, 259 black and 976 conventional mutual funds, the investigation contrasts the financial performance of the three dissimilar investment orientations over the 1991-2014 period. Over the full sample period, green mutual funds significantly underperform relative to conventional funds, while no significant risk-adjusted performance differences between green and black mutual funds could be established during the same period. Environmentally friendly investment vehicles display a significant exposure to small cap and growth stocks, while black funds are more exposed to value stocks. Remarkably, the green funds’ risk-adjusted return profile progressively improves over time until no difference in the performance of the green and the conventional classes could be discerned. Further evidence suggests that the green funds are beginning to significantly outperform their black peers, especially over the 2012-2014 investment window.

Socially Responsible Investing - An Emerging Concept in Investment Management

Socially Responsible Investing (SRI), which integrates social and environmental criteria into traditional investment decision process, has emerged as a new concept in investing, especially in the wake of growing concerns for corporate social responsibility. This paper provides an extensive review of literature on the performance of socially responsible investing. We find that almost in every study related to performance evaluation; socially responsible funds/companies perform better or at least not inferior to conventional funds or respective benchmarks. We also find that costs of socially responsible investing were less than or equal to conventional funds. So, there is no penalty for investing in socially responsible stocks. Rather, it is more rewarding especially during the time of financial crisis. The important implication of our review is for investment decisions as investors may start investing in socially responsible companies to reap higher returns at lower risk. We also expect that for SRI/green investment promotion, more and more socially responsible mutual funds or green mutual funds would be launched in India in near future.

Green Funds & Green Investing: A New Route to Green India

If you are looking to invest some money in stocks, are environmentally conscious and are frustrated with the way big corporations pollute environment, then green mutual funds may be for you. Despite being among the most recent types of funds in the market, these mutual funds have gained in popularity among many investors, for the past few years. Green funds are managed by companies which invest in corporations committed to the environment. Some of these corporations either implement clean energy practices or good waste management techniques. Then there are those which make recycled products or promote renewal energy. And some of them set aside resources to clean the environment. These are corporations which, while increasing their bottom line and making profit, do their bit for the environment too. Apart from the 'feel good factor' that you are helping to keep this planet clean and are a socially responsible citizen, you can also gain financially by investing in these funds. In the past there were very few companies that could have been called environment friendly. However, with several countries pledging their support for the environment and making environment friendly policies, several companies have come forward with a definite objective of being sensitive to the environment and reduce emissions. Indian mutual funds have not really shown much action in the green fund space through their global counter parts are active in the sector.In this context, this paper is intends to draw attention of mutual fund organizations towards green mutual funds, which are helpful for safe-environment and protection to earth. This paper focuses on various green funds, green investing companies and green funds mutual funds in India. Here, green India refers to pollution free India.

Do green mutual funds perform well?

PurposeThe purpose of this paper is to compare the financial performance of green and traditional mutual funds in the USA.Design/methodology/approachA total of 131 green mutual funds identified by US SIF, were compared with the averages of all traditional mutual funds in their respective Morningstar categories. Performance measures analyzed included annualized rates of return, expense ratios, and Sharpe ratios, among others. Most data pertained to at least the past three years, while other data pertained to the most recent 5 to 15 years.FindingsThe results demonstrate that green mutual funds have generated lower returns and similar risks compared to traditional mutual funds in their respective Morningstar categories. Green mutual funds have underperformed on a risk‐adjusted basis.Research limitations/implicationsSince there is no formal definition of a green mutual fund, the researcher and investor must make a subjective call in assessing which funds invest “green”. However, at least in this early stage in the history of green investing, green mutual funds have underperformed their peers.Originality/valueResults confirm the limitations of green investing as suggested by various researchers, among them Sharpe, Rudd and Kurtz and DiBartolomeo. Results stand in contrast to Corson and Van Dyck and Statman, among others, which reported no significant underperformance for socially responsible investments.

Green and Good? The Investment Performance of US Environmental Mutual Funds

Increased concern for the environment has increased the number of investment opportunities in mutual funds specialized in promoting responsible environmental attitudes. This article examines the performance and risk sensitivities of US green mutual funds vis-a-vis their conventional peers. We also analyze and compare this performance relative to other socially responsible investing (SRI) mutual funds. In order to implement this analysis, we apply a CAPM-based methodology and find that in the 1987–2009 period, environ- mental funds had lower performance than conventional funds with similar characteristics. However, if we focus on a more recent period (2001–2009), green funds achieved adjusted returns not significantly different from the rest of SRI and conventional mutual funds.

FOCUS: Ethical Demands and Requirements in Investment Management

Investment Management makes heavy ethical demands which are not an optional add‐on, but part of the job of being a financial agent and fiduciary. The author is founder and President of Skandia Fonds, the Norwegian mutual funds management company affiliated with Skandia Group which pioneered the concept of green mutual funds in Norway. This paper was delivered at the Sixth Annual Conference of the European Business Ethics Network, held in Oslo last month. Its views are those of the author, and do not necessarily represent his company's policy.