• ecological performance;
  • environmental investment;
  • equity funds;
  • impact assessment;
  • industrial ecology;
  • socially responsible investments (SRI)

This study compares equity funds that are managed according to sustainability goals with conventionally managed funds with respect to their environmental impacts. Overlap in the portfolios of sustainable equity funds and conventional equity funds can be very large. Further, the sector allocation of both types of funds is generally very similar, because portfolio managers follow a chosen benchmark to minimize risk. These two effects may result in no difference existing between the two types of funds in terms of their environmental impact and damage (null hypothesis of this research). This study comparatively assesses the environmental impact of portfolios of 26 investment funds: 13 sustainable investment funds and 13 conventional funds, which are managed according to the benchmark MSCI World. The study applies input–output life-cycle assessment (IO-LCA) in combination with a simulation of company-specific environmental performance. The environmental impact is evaluated per functional unit for each fund, measured as the risk-adjusted financial performance. The statistical analysis showed that the analyzed sustainable investment funds performed better with respect to environmental impact assessment but worse in economic risk-adjusted performance (RAP) over the period 2000-2004. In 2004, however, the RAP of the selected sustainable investment funds showed better performance. Both samples considerably overlap for the environmental and economic parameters. The results suggest that the environmental impact of sustainable investment funds in the sample is slightly less than that of conventional funds.