The performance of Hungarian sustainability and ESG mutual funds

Sustainable and ESG (environmental, social, and governance) investments are gaining prominence worldwide. The question from a financial viewpoint is whether investors need to sacrifice financial return when making their investment decisions to purchase sustainable or ESG mutual funds. In other words, does investing in socially better or greener mutual funds offer a relatively lower return than traditional investment strategies? This paper identifies the Hungarian sustainability and ESG mutual funds and analyses the riskadjusted performance of these mutual funds to answer the question. The results indicate that ESG funds perform better on average only in the bond type category, while funds investing traditionally have better risk-adjusted performance in the mixed and absolute return fund type categories. For equity type funds, the results are ambiguous.

Keywords: mutual funds, risk-adjusted performance, sustainability, ESG