How to choose green?

Abstract

This paper investigates if there is any difference between active managed funds and passive managed funds in regard to their risk-adjusted return. The thesis focuses on Swedish sustainable funds that invest in accordance with the ESG (environmental, governance and social) criteria during the time period 2011-2021. By using two models, the Capital asset pricing model and Carhart’s Four-factor model we retrieve explanatory information for the return. Further, risk-adjusted measurements were used such as Jensen’s Alpha, Sharpe ratio and Treynor ratio to draw the analysis. Finally we include the different expense ratios to see if any of the portfolios outperforms. The results vary between the different portfolios that we created. The active large cap portfolio performs better than the passive large cap portfolio in regard to its costs, i.e. expense ratio. When comparing the portfolios in the broader mixed segment the passive portfolio shows better performance than the active portfolio.