Funds that invest in sustainable stocks are often overvalued in trading.
This is the conclusion that financial scientists at the University of Giessen have come to
Christina Bannier's team examined the relationship between the environmental, social and governance (ESG) rating of an active fund and the investment expertise of fund management.
To do this, the researchers evaluated a data set with more than 1,500 US mutual funds over a period of ten years.
Buyers react less often to negative signals
Sascha Zoske
Journalist in the Rhein-Main-Zeitung.
Follow I follow
According to Bannier, investors who care about the ecological and social compatibility of their investments react less strongly to negative valuation signals. The result is that the shares of such funds are valued higher than it is justified. This can then also be seen in a comparison with the respective fund benchmark - i.e. the benchmark index, which is used to measure the fund's performance.
"If the trend towards sustainability in investments continues, it is urgently necessary to adapt the methods with which the performance of fund managers is assessed," says Bannier.
Those responsible would have to recognize that the buyers of such papers weighed between financial and non-financial - i.e. sustainable - returns.
If the managers do not take this into account, the quality of their work cannot be precisely assessed using the fund benchmark.
Link to the publication