Sustainable and Governance Investment Funds in Brazil: A Performance Evaluation

Abstract

This study analyzes the financial performance of sustainable investments against conventional investment products in an emerging market context using a sample of sustainable and governance equity investment funds that focus solely on the Brazilian stock market. A quantitative analysis is used to compare monthly returns, volatility, and Jensen’s alpha for the period of January 2017 to December 2019 (bull market) and January 2020 and December 2021 (bear market). The study finds that sustainable investments do not diverge from conventional stock funds during a bear market period in terms of financial performance and present similar volatility. The main findings of this study corroborate the latest research from the ANBIMA reports related to sustainability practices in the Brazilian capital markets. The study also contributes to the academic literature by providing empirical evidence from an emerging economy such as Brazil of reasonable performance from sustainable investments in different periods of an economic cycle. The study has a few limitations such as the lack of a taxonomy and an ESG regulatory framework for the sustainable and governance equity investment funds and the small number of sustainable and governance equity investment funds in Brazil.