Date of Award
Spring 2021
Degree Name
Bachelor of Science (BS)
Advisor(s)
Lin Tong
Abstract
The purpose of this research paper is to determine the effects of an ESG focus on mutual fund performance and risk. Namely, this paper will attempt to discern whether there is any correlation between a mutual fund denoting itself as having an ESG focus, and the monthly returns offered by the fund. The focus of this paper is primarily in regards to fixed income mutual funds, as prior research into the effects of ESG on these funds is substantially than research on equity mutual funds. This paper begins with an introduction regarding the importance of further research into ESG and its effects. A literature review is then conducted which details prior research as to ESG and its effects on mutual fund performance and risk. This literature review also differentiates between prior research conducted on equity focused mutual funds and fixed income focused mutual funds. In order to test the effects of an ESG on a mutual fund’s performance, a sample set of funds will be selected. Following this, information regarding each of those fund’s primary holdings and their focus, as well as information regarding their performance will be collected. This data will then be utilized to create four data sets, differentiating between funds with and without an ESG focus and between funds with a fixed income or an equity focus. The performance and risk levels associated with these data sets will then be compared to determine whether an ESG focus provides an increased, or decreased level of return or risk mitigation and whether fixed income mutual funds benefit from an ESG focus in the same way that equity funds have been shown to. Based on prior research, the hypothesis of this study is that an ESG focused mutual fund will produce slightly lower returns on average; however, the fund will likely have a higher risk adjusted performance due to lowered risk levels. This research is important because it will further explore the importance of ESG, which remains a hotly contested topic, and add to further research regarding the effects that an ESG focus can have on a fixed income mutual fund.
Recommended Citation
Burke, Michael, "The Importance of an ESG Focus in Mutual Fund Investments" (2021). Gabelli School of Business Honors Thesis Collection. 45.
https://research.library.fordham.edu/gabelli_thesis/45
