Insurance companies hold large amounts of assets to ensure that they can meet the
claims of policyholders. They prefer safer investments with lower risk to guarantee
future payouts. Sustainability has become a growing topic over the last couple
of years and insurance companies have the possibilities to make the world more
sustainable. However, sufficient returns is a priority. This thesis will investigate the
impact of sustainable investments on portfolio risk and returns.
To enable this investigation, a general and a sustainable portfolio were created for
two different markets. These portfolios were then managed using different portfolio
theories and backtested to assess their performance compared to a benchmark index
over the last 12–15 years. We also tested different measurements to see if there was
a statistically significant difference between the general and sustainable portfolios.
We found that in a smaller market with a low number of sustainable companies
that generate better returns than the benchmark index, general portfolios tend to
generate better returns and lower risk compared to sustainable portfolios. In a larger
market with a larger set of unsustainable stocks, we found that the maximum drawdown
where lower for the sustainable portfolios, otherwise, no statistically significant
difference were found.
After analysing the results, we can say that the they can be used as a guideline
for someone interested in markets that are similar to the ones used in this thesis.
Otherwise, one should recreate this investigation with their specific sets of stocks to
help them get more useful results. Investing is a personal matter and a change of
preferred markets or sustainability criteria etc. could alter the results.
2023.