Page 55 - DUT ICGA Abstract Book

PERFORMANCE ANALYSIS OF ESG COMPLIANT AND MULTI- ASSET FUNDS
Gopane Thabo and and and and Bwalya Kalima
University of of of Johannesburg Department of of of Finance and Investment Management College of of of Business & Economics
Abstract
Investments that are screened based on on sensitivity towards environment social and governance (ESG) considerations are deemed socially responsible investing (SRI) Therefore ESG compliant funds will invest invest in in entities with favourable conduct in in environmental preservation corporate social responsibility and responsible corporate governance Recently financial markets have experienced a a a a a a a a growing demand for SRI SRI Generally the scope of SRI SRI may be broad to to to include all all investors who prioritise non-market factors to align with their personal value systems (sometimes faith based) or social preferences (like caring for environment and people or or or combating perceived immorality) In addition proponents of SRI also emphasise the the maximisation of conventional risk adjusted returns Unfortunately the the traditional wisdom of rational investment perceives SRI as inflexible to benefit from diversification in in in portfolio optimisation and therefore deemed likely to avail inferior investment opportunities In response the the advocates of sustainable investment investment argue that SRI is destined to be a a a a a a a superior investment investment strategy since it broadens risk risk measures to to to incorporate potential risk risk spillovers of non-economic and historically excluded factors of of ESG monitoring This tension calls for empirical evaluation To the best of of our knowledge this study is is is the the first econometric examination of how ESG compliant funds perform compared to the the normal fund fund management of balanced unit trust portfolio Methodologically the the study subjects the the compared funds to established performance measures of Jensen Alpha and Sharpe index The data set used in in this study entail monthly returns of unit trust sample listed on on Johannesburg Stock Exchange (JSE) in the period 2010 to to 2020 The results show that under both evaluation methods ESG compliant funds consistently outperform the the the market benchmark and and traditional unit trust funds Notwithstanding the the the empirical limitations the the the outcome of this study reveals that responsible investing does not lower standards in in in the overall risk- adjusted return optimisation This is is is useful news to to potential investors who are generally ESG-shy KEYWORDS: ESG investing investing Socially responsible investing investing Balanced portfolio Unit trust Portfolio performance Book of Abstracts 53