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Long-term Sustainable Investment for Retirement

Owadally, I. ORCID: 0000-0002-0830-3554, Mwizere, J-R., Kalidas, N. , Murugesu, K. & Kashif, M. (2021). Long-term Sustainable Investment for Retirement. Sustainability, 13(9), article number 5000. doi: 10.3390/su13095000


We consider whether sustainable investment can deliver performance comparable to conventional investment in investors’ long-term retirement plans. On the capital markets, sustainable investment can be achieved through various instruments and strategies, one of them being investment in mutual funds that subscribe to ESG (environmental, social, and governance) principles. First, we compare the investment performance of ESG funds with matched conventional funds over the period 1994–2020, in Europe and the U.S. We find no significant evidence of differing performance (at 5% level) despite using a number of investment performance metrics. Second, we perform a historical backtest to model a UK personal retirement plan from 2000 till 2020, taking full account of investment management fees and transaction costs. We find that investing in an index-tracker fund overlaid with ESG screening delivers a pension which is 10.4% larger than is achieved if the index-tracker fund is used without screening. This is also 20.2% larger than is achieved by investing in a collection of actively managed funds with a sustainable purpose. We conclude that an ESG-screened long-term passive investment approach for retirement plans is likely to be successful in satisfying the twin objectives of a secure retirement income and of sustainability.

Publication Type: Article
Additional Information: ©2021 by the authors. This article is an open access articledistributed under the terms andconditions of the Creative CommonsAttribution (CC BY) license ( No special permission is required to reuse all or part of article published by MDPI, including figures and tables. Any part of the article may be reused without permission provided that the original article is clearly cited.
Publisher Keywords: environmental; social and governance (ESG); ethical investment; socially responsible investment; performance evaluation
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Actuarial Science & Insurance
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