Measuring the Sustainability Impact of 25 European ESG Funds

Measuring the Sustainability Impact of 25 European ESG Funds, is co-authored by Larry Abele and Antti Savilaakso, both with Auriel Investors.

It is the practitioner winner of the 2018 IRRCi investor research competition.

This research introduces a new quantitative data-driven model to measure the level of sustainable investments in a portfolio as compared against a benchmark by creating a measure called “active ESG (environmental, social and governance) share” intended to quantify the impact of sustainability considerations on the portfolio’s holdings. The research then compares the active ESG share of 25 diversified European ESG funds. It finds that these funds prioritize the provision of environmentally and socially positive products and services by their portfolio companies, but have lower board independence, gender equality and social impacts than their benchmark. In general, the funds had an active ESG share of only four to five percent, meaning that sustainability issues only caused a four to five percent holding differential from a portfolio that did not consider  sustainability.