Possible drivers of high performance of European mutual ESG funds—an fsQCA view on sustainable investing

Abstract

The paper applies the tools of fsQCA and their recent modifications by Stoklasa, Luukka and Talášek to analyze the possible drivers of high performance of European ESG funds. 429 mutual equity growth ESG funds from the European area are being analyzed. We focus mainly on the connection of Morningstar sustainability rating with the performance of the funds during 2018-2021 measured by Jensen's alpha and the Sharpe ratio. Other possible drivers of the success of these funds are also being explored. We identify the prevailing assumed relationships between funds' sustainability and other characteristics with their performance and formulate rules to be investigated using the fsQCA methodology. More specifically the possibility of high performance being associated with a high sustainability rating of the funds is explored in detail. Our results indicate that although the high performance cannot be clearly associated with the high sustainability rating of a fund, high sustainability rating seems to be preventing the low performance of the fund.

A Fuzzy-Set Qualitative Comparative Analysis of Causal Configurations Influencing Mutual Fund Performance: The Role of Fund Manager Skill

“…In a paper focused on ESG (Environmental, Social, and Governance) rated funds, Welling and Stoklasa [17] analyze the possible drivers of high performance of European ESG funds. They examine the commonly presumed connections between a fund's sustainability and its performance, establishing hypotheses to be explored through the fsQCA approach.…”

KNOWCON 2022. Knowledge on Economics and Management: Conference Proceedings

“…More specifically we will apply the recently proposed fuzzified consistency and coverage measures for fsQCA (Stoklasa et al, 2017(Stoklasa et al, , 2018 to enable for the IF and THEN parts of the investigated relationships to be fuzzy. These measures have already been successfully applied in the area of strategic management (Kumbure et al, 2020), in academic success prediction capabilities assessment (Stoklasa et al, 2020), in the field of investment decision-making (Welling & Stoklasa, 2021) and others.…”