Examining the financial performance of pension funds focused on sectors related to sustainable development goals

ABSTRACT

The main aim of this study is to examine the financial performance achieved by pension funds that invest in one of the sectors related to sustainable investment goals such as agribusiness, healthcare, energy, infrastructure, technology, and natural resources or in several sectors that have adopted environmental (green) or ethical criteria. This study employs both Carhart and Bollen and Busse models on a sample of 1,546 pension funds commercialized around the world from January 2007 to December 2018. The results indicate that some pension funds investing in one specific sector involved in the sustainable development goals are able to beat the market and conventional pension funds. Concretely, using conditional and unconditional Carhart models, it was found that the technology-related pension fund category achieves the largest mean risk-adjusted return, while the energy-related pension fund category obtains the lowest mean risk-adjusted return, indicating that restricting the investment universe does not reduce the risk-adjusted return. The source of this financial performance mainly comes from the successful stock-picking abilities shown by managers specialized in the technology sector and the poor selectivity skills shown by managers specialized in the energy sector, which indicate that investment opportunities differ among sustainable development goal-related sectors.

KEYWORDS:

• Sustainable development goals
• pension funds
• financial performance
• economic information
• managerial skills

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. We also compare the distribution of the financial performance between pension fund categories by adopting a Mann–Whitney’s U non-parametric test (available upon request). The results are similar to those achieved in the Student’s t-parametric test in almost all cases.