A Fund Analysis of Sustainable Investing in the Norwegian Market

Abstract

This thesis analyzes risk – adjusted returns for a sample of sustainable and conventional funds in the Norwegian market during a nine-year period (January 2011 to December 2018). It contributes with further research on the sustainable versus conventional investing debate, in the little investigated Norwegian market. The methodological approach incorporates internationally accepted capital asset pricing models. Additionally, we consider pricing factors relevant specifically for the Norwegian market and we construct a Norwegian model that incorporates empirically valid pricing factors for this region. Like in previous international research, we find that the risk-adjusted performance of Norwegian sustainable funds is matched with that of Norwegian conventional funds. Our findings are particularly interesting for environmental, social, and governance – oriented investors and organizations. An example is the Norwegian Government Pension Fund Global as the fund uses sustainable investment approaches in its portfolio management. The data suggests that such investors do not have to pay a premium for investing sustainably. Additionally, we find that sustainable funds are significantly less exposed to small capitalization stocks than conventional funds. Our risk-adjusted performance findings are robust for a range of time periods and sustainability definitions. Risk factor exposure has showed minor variances depending on periods and sustainability definitions.