Determinants of Sustainability in U.S. Equity Mutual Funds
Carlos Arenas-Laorga
Villanueva University
https://doi.org/10.47191/jefms/v8-i4-28ABSTRACT:
This study investigates the determinants of sustainability in U.S. equity mutual funds, focusing on the influence of involvement in controversial industries on sustainability scores. Utilizing a dataset of 1274 funds from Morningstar Direct, the research applies multiple linear regression and Principal Component Analysis (PCA) to identify key variables affecting the Portfolio Corporate Sustainability Score. The findings indicate significant impacts from involvement in fur and specialty leather, adult entertainment, genetically modified organisms (GMO), and thermal coal. The study highlights the importance of exclusion policies and advanced analytical tools in enhancing sustainability. Despite some counterintuitive results, particularly concerning palm oil, the analysis provides a comprehensive understanding of how controversial product involvement shapes sustainability outcomes in mutual funds.
KEYWORDS:
Sustainability, U.S. equity mutual funds, ESG factors, Controversial industries, Multiple linear regression, Principal Component Analysis (PCA), Investment exclusion policies, Portfolio Corporate Sustainability Score.
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