In this project, I investigated the relationship between ESG fund performance and the behavioural maturity of their underlying holdings.

The project uses the GOLDEN Sustainability Dataset, which captures firms’ sustainability initiatives, to construct a Transformation Exposure Score for ESG funds. The measure captures the extent to which a fund’s holdings are undertaking sustainability initiatives that reflect innovation-driven, strategic change embedded within their business models, rather than focusing primarily on compliance and risk management.

The results indicate a positive association between behavioural maturity and fund returns. If this relationship is supported by further research, it could have implications for investors, suggesting that allocating capital towards companies undertaking deeper, transformation-oriented sustainability initiatives may be associated with higher returns. More broadly, this could help redirect capital towards firms actively addressing sustainability challenges through their business models, rather than simply meeting compliance requirements.