Do 'Good Guys' Finish Last? The Relationship between Morningstar Sustainability Ratings and Mutual Fund Performance

Dolvin, Steven D.; Fulkerson, Jon A.; Krukover, Anna

doi:10.2139/ssrn.3019403

Cited by 7 publications

(16 citation statements)

References 15 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…For this reason, the inclusion of sustainability scores in our work allows us to evaluate whether the degree of sustainability of the portfolio in which the funds are invested has a positive relation with performance. As far as we know, only [22,23] analyzed this effect. Authors in Reference [22] conclude that funds with higher Morningstar Sustainability scores have similar alphas from those with lower sustainability scores.…”

Section: Introductionmentioning

confidence: 99%

“…As far as we know, only [22,23] analyzed this effect. Authors in Reference [22] conclude that funds with higher Morningstar Sustainability scores have similar alphas from those with lower sustainability scores. Authors also observe that there is little difference in the performance or sustainability scores between self-proclaimed SRI funds versus those that fall in the top 50 and top 20 percent of Morningstar's Sustainability scores.…”

Section: Introductionmentioning

confidence: 99%

“…The main contribution of our paper is to fill the gap in SRI investing that, with very few exceptions [22,23], employ self-declared dichotomous variables to identify socially conscious mutual funds. Differently to these two exceptions, that focus on U.S. domestic mutual funds, we extend the analysis of the degree of sustainability to the European market, which accounts for over half of global SRI assets as sustainable investing takes off [1].…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Does Sustainability Score Impact Mutual Fund Performance?

et al. 2019

View full text Add to dashboard Cite

Given that sustainable investing constitutes a major force across global financial markets, in 2016 Morningstar began reporting Morningstar Sustainability scores. We used the 2016, 2017 and 2018 scores to study the effects of socially responsible investments (SRI) on European equity fund performance. Sustainability scores impacted positively on performance, which was consistent with the idea that the mutual funds invested in companies with better scores generate better risk-adjusted and not-risk adjusted performance. We also tested the relation on mutual fund flows and risk. The sustainability score in the previous year is significant on the flows, so higher-rated funds receive a larger volume of funds. In terms of risk, the level of sustainability is negatively related to the value at risk (VaR) of the fund, supporting that higher scored mutual funds offer better protection against extreme losses.

show abstract

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Does Sustainability Score Impact Mutual Fund Performance?

et al. 2019

View full text Add to dashboard Cite

show abstract

“…Although there is not much difference in risk-adjusted returns between ESG funds and other funds, Dolvin, Fulkerson, Krukover (2019) find that there is a difference in risk profile since ESG funds are primarily concentrated in large cap stocks, which leads to a potential sacrifice in diversity of the overall portfolio. Other studies (e.g., O'Brien, Liao & Campagna, 2017), however, find that although an SRI approach does come with a limited range of investment opportunities, it does not come with additional risk as their sample yielded similar Sharpe ratios and standard deviations for both the SRI indexes and their broad market counterparts.…”

Section: Environmental Social and Governance (Esg) Fund Performancementioning

confidence: 76%

“…With the significant increase in SRI investing, as evidenced by the large amount of fund flows into this area, the standing question became whether following an SRI approach required sacrificing investment return. To answer this question, Dolvin, Fulkerson and Krukover (2019) examine if there is any penalty in terms of return for investors who followed this philosophical approach compared to those investors that did not. They find that funds with high sustainability scores as rated by Morningstar have about the same risk adjusted return as compared to other funds.…”

Section: Environmental Social and Governance (Esg) Fund Performancementioning

confidence: 99%

Do Socially Conscious ETFs Match Their Active Counterparts?

Cultice¹,

Dolvin²

2020

IBR

View full text Add to dashboard Cite

Over the past decade, Socially Responsible Investing (SRI) has grown at a rapid pace and, by some estimates, now represents a quarter of the $48 trillion in assets under professional management in the United States. At the same time, investors have broadly shifted from active to passive investing strategies. While there is significant research in each of these respective areas, we believe that we are the first to examine whether a socially conscious investor can employ a passive approach or if the constrained nature of SRI necessitates active management. As such, we examine the performance of socially conscious ETFs versus a matched sample of actively managed SRI mutual funds. We find the performance, as a whole, to be insignificantly different between the two groups, suggesting that the benefits of active management in this construct effectively offset the cost advantage of passive ETFs.

show abstract

The level of sustainability and mutual fund performance in Europe: An empirical analysis using ESG ratings

Abate

Basile

Ferrari

2021

Corp Soc Responsibility Env

View full text Add to dashboard Cite

Over recent years, investors' attention on the environment, social responsibility, and governance (ESG) has been growing. At the same time, managers, investors, and regulators are interested in ascertaining whether mutual funds that invest in ESG‐compliant assets perform better than those with a low ESG commitment. The sustainability of funds' portfolios can be measured by ESG ratings, a measure of the financially material ESG factors of the securities held by a fund. Our study therefore aims to verify whether funds with high ESG ratings outperform funds with low ESG ratings, considering the risks taken, including higher moments, and costs borne by investors. Our analysis is carried out on a sample of 634 European mutual funds. By using data envelopment analysis, it provides evidence of the superior efficiency of funds investing in high ESG‐rated securities.

show abstract

Do 'Good Guys' Finish Last? The Relationship between Morningstar Sustainability Ratings and Mutual Fund Performance

Cited by 7 publications

References 15 publications

Does Sustainability Score Impact Mutual Fund Performance?

Does Sustainability Score Impact Mutual Fund Performance?

Do Socially Conscious ETFs Match Their Active Counterparts?

The level of sustainability and mutual fund performance in Europe: An empirical analysis using ESG ratings

Contact Info

Product

Resources

About