Do ESG investors pay a price for doing good - A matched pair analysis of the Swedish fund market.

Abstract

In this thesis we examine the financial performance of Swedish mutual equity funds. We look at differences between sustainable, defined as ESG, and conventional funds. The financial performance is examined using the Capital Asset Pricing Model, the Fama-French three-factor model and Carhart’s four-factor model. Further, the cross-sectional difference in performance between ESG and conventional funds is examined via a dummy model that differentiate the ESG attribute. To control for differences in fund attributes between the groups we use a matched pair analysis that controls for age, size and risk exposure. Our results show that both ESG and conventional funds outperform their market benchmark. Additionally, we concludethat ESG funds perform worse than conventional funds.