Do German Green Mutual Funds Perform Better Than Their Peers?

Due to current environment awareness, there has been an increase in investment opportunities concerning mutual funds with a focus on environmental issues. This paper analyzes the performance and risk sensitivities of German green mutual funds in comparison with their German socially responsible investment (SRI) and conventional peers. We also evaluate the results of the German green mutual funds in different market conditions. Because of this, we use and compare this performance during three periods, differentiating crises and non-crisis periods. In order to implement this analysis, we apply a CAPM-1 factor and a Carhart 4-factor methodology and find that in the full sample period 2007–2018 period, environmental funds had lower performance than conventional funds and SRI funds with similar characteristics. However, if we focus on crisis and non-crisis periods, the results change. During the financial crisis (2007–2009), green funds achieved adjusted returns slightly better than their peers; in the Eurozone sovereign debt crisis (2010-2012), the results are again similar to the results from the full sample period. And during the non-crisis period, they are not significantly different from conventional mutual funds, but they perform better than SRI mutual funds.