Sustainable Investing Under Market Uncertainty: An Empirical Evaluation of Risk, Return, and Portfolio Performance
Keywords:
Sustainable investing, ESG, portfolio performance, risk-return analysis, exchange-traded fundsAbstract
Investors are increasingly interested in investing in companies that integrate environmental, social and governance factors into their investment strategies as sustainable investing becomes more and more relevant. In volatile markets, assessing the upside and the downside of a potential investment is important for understanding the robustness of a sustainable investment approach. This study evaluates the historical risk, return, and portfolio performance of a sustainable investment portfolio under changing market conditions. A quantitative descriptive design was employed using daily market data from May 2019 to June 2024. The analysis incorporated descriptive statistics, adjusted closing price trends, daily return distribution, rolling 30-day annualized volatility, drawdown analysis, monthly return patterns, annual performance summaries, and established investment performance measures, including cumulative return, compound annual growth rate, annualized return, annualized volatility, maximum drawdown, Sharpe ratio, and Calmar ratio. The portfolio generated a cumulative return of 118.06%, a compound annual growth rate of 16.60%, and an annualized return of 18.97%. Annualized volatility was 20.67%, while the maximum drawdown reached -34.26%. The Sharpe ratio (0.8209) and Calmar ratio (0.4846) indicate favorable risk-adjusted performance. Although volatility increased substantially during the COVID-19 shock and again in 2022, the portfolio demonstrated resilience by recovering and reaching new price highs by 2024. The results suggest that in spite of periods of high market uncertainty, sustainable investing can lead to competitive long-term returns, and both return- and risk-based performance metrics are relevant when assessing sustainable portfolios.
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