Measuring the environmental performance of Green SRI funds: a DEA approach

In this paper we tackle the issue of evaluating an important class of green investing that
integrate classical financial tasks with some environmental issues: the so-called green mutual
funds.
In order to do this, we first propose three measures of environmental sustainability which may
give financial agents information on the greenity of their investments. These alternative indicators
could serve as an overall measure of environmental sustainability and overcome the drawback that
limits the evaluation of green investments to the measurement of CO2 emissions while often more
than one environmental aspects may be considered.
Secondly, we propose some models aimed at evaluating the performance of green mutual funds
by taking into account the proposed environmental measures as well as some classical financial
indicators. The analysis is carried out in a Data Envelopment Analysis (DEA) framework, since
DEA models can consider strategic non-financial objective measures in addition to traditional
financial metrics in order to give a more balanced view of socially responsible investments (SRI).
The presented models include indicators of environmental sustainability in different ways, either
by penalizing a high environmental consumption or by rewarding an environmental saving entailed
by a low consumption. The environmental measures and the models proposed are applied to a
set of European green funds in the periods 2012–2015 and 2010–2015 to conduct an extensive
analysis.