Risk-Adjusted Performance of Sustainable Mutual Funds: Evidence from Emerging and Developed Markets

The paper analyzes the performance of sustainable mutual funds in both emerging and developed markets with respect to three most popular risk-adjusted performance metrics: Treynor ratio, Jensen Alpha and Sharpe ratio. This paper analyzes 312 sustainable mutual funds that are operating in 15 countries within the time frame of 5 years (2019-2023) and assesses the potential of Environmental, Social, and Governance (ESG) investment strategies to achieve better risk-adjusted returns than traditional funds. The results show that sustainable funds in more developed markets exhibit better Jensen’s Alpha performance (0.47% monthly excess return, p