Is there a performance trade-off by choosing sustainable?

Sammanfattning: This paper investigates the performance differences between sustainable and unsustainable funds, measured by ESG rating, over the time period of January 2006 to December 2020 on OMX Stockholm. It also sheds light on the performance differences between unsustainable funds and unsustainable funds claiming to be sustainable, i.e. greenwashers. The paper uses Fama and French five-factor model and time series data to extend previous research within fund performance and ESG screening, and furthermore exposes greenwashing problems in the fund investment industry. The paper finds evidence that there exists a performance trade-off by investing in sustainable funds and furthermore finds no evidence that greenwashing funds perform differently from their ESG-peers. The study, furthermore, generates indications of the advantages that greenwashing funds obtain, compared to unsustainable and sustainable funds, by marketing themselves as sustainable.