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SRI and development of labels: Do labelled European equity funds perform differently than their conventional counterparts?

Van Parijs, Sébastien
(2021)

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Vanparijs_50931600_2021.pdf
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Details

Supervisors
Grégoire, Philippe
Faculty
Louvain School of Management
Degree label
Master [120] : ingénieur de gestion, à finalité spécialisée
Abstract
The world is undergoing many changes and developments, and the climate and social challenges are numerous. Finance today represents a key element in the successful transition of our societies towards a more sustainable world. The excesses of the past and the challenges facing humanity have therefore led to the development of a finance that is oriented towards the world of tomorrow. Many actors are involved in this development and their definitions of sustainability differs. A review of these divergences is made in the first part of this thesis. In a second step, the question of behavior in terms of performance but also in terms of risk will be questioned. A consensus still does not seem to be reached in the literature, but the studies tend to be more optimistic than before. A comparative study in terms of performance and risk is therefore carried out in this thesis between a sample of SRI-labelled funds (108 funds) and conventional funds (164 funds) between January 2015 and May 2021. The results are mixed, showing a slight outperformance over the total period, accompanied by higher market risk exposure (beta) and slightly higher volatility (which seems to be decreasing in recent years). This outperformance is significant for Jensen's alpha and Sharpe ratio only. Furthermore, SRI-labelled investments seem to have been less impacted by the March 2020 crisis, showing a sign of resilience in times of crisis. Finally, in the post-crisis period, conventional investments have benefited from sector rotation supporting their outperformance.The results, although optimistic, are mixed and depend on the indicators and the periods chosen. Certain biases also seem to be at the origin of these outperformance periods. Sustainable investments therefore appear to be an interesting alternative for combining performance and improvement of our societies.