Do European renewable energy mutual funds foster the transition to a low-carbon economy? Carmen-Pilar Martí-Ballester Business Department, Universitat Aut onoma de Barcelona, 08193 Bellaterra, Spain article info Article history: Received 21 November 2018 Received in revised form 19 March 2019 Accepted 22 May 2019 Available online 23 May 2019 Keywords: Conventional energy mutual funds Renewable energy mutual funds Black energy mutual funds Conditional financial performance models Unconditional financial performance models abstract Economic growth and development around the world are leading to increasing worldwide demand for energy, whose production still mainly comes from fossil fuels generating large amounts of greenhouse gas emissions, which contribute to global warming and climate change. To mitigate climate change, the European Union implemented an energy policy strategy that encourages firms to implement sustainable energy systems. This could generate investment opportunities in energy efficiency and renewable energy projects around the world for European mutual funds. Therefore, the main aim of this paper is to analyze the financial performance of energy and renewable energy mutual funds using conditional and uncon- ditional models. To this end, we have a sample of 4496 mutual funds commercialized in Europe in the period 2007e2018. Our results indicate that renewable energy mutual funds perform similarly to the market using conditional models. However, they underperform their conventional peers using a specialized market benchmark, reaching similar performance to black energy funds. While the total expense ratio negatively affects renewable energy financial performance, other fund characteristics, such as size or Socially Responsible Investing (SRI) certification, do not affect it. © 2019 Elsevier Ltd. All rights reserved. 1. Introduction Economic growth and development around the world are leading to increasing worldwide demand for energy, whose pro- duction still mainly comes from fossil fuels which account for approximately 82% of the total global primary energy supply over the past four decades [1]. The oxidation of carbon in fuels during combustion to generate energy produces greenhouse gas emis- sions, specifically about 60% of global carbon dioxide (CO 2 ) emis- sions in 2015, which contribute to global warming and climate change [1 ,2,3]. To mitigate climate change, in 2007 the European Union implemented an energy policy strategy focused on three key ob- jectives that were revised in the 2030 Climate and Energy Policy Framework in 2014 [4] with a view to (1) reducing greenhouse gas emissions by 40% compared to 1990 levels, taking into account future international climate agreements, (2) increasing the share of renewable energies to 27% in 2030 and (3) achieving the 30% en- ergy efficiency target for the horizon of 2030 in the 2007 reference scenario. The European Union intends to achieve these objectives by means of several climate policy instruments, such as legislative measures (Renewable Energy Directive-2009/28/EC, Energy Ser- vices Directive- 2006/32/EC, among others), the creation of an in- ternal EU energy market, the creation of the EU-Emissions Trading Scheme (EU-ETS) and energy sector subsidies and programs, as indicated by the International Energy Agency [5]. The aforementioned European Union Climate Change programs, such as the European Economic Recovery Program, New Entrants’ Reserve (NER) 300 program and Strategic Energy Technology Plan, promote and finance the development of new low carbon tech- nologies - which would allow countries to improve their energy efficiency - and, especially, renewable technologies - which would allow countries to move toward zero CO 2 emissions from fuel combustion by generating electricity and heat - in the European Union region, while providing incentives to less-developed coun- tries to use clean technologies through the Global Energy Efficiency and Renewable Energy Fund (GEEREF). Abbreviations: SRI, Socially Responsible Investing; IEA, International Energy Agency; CO 2 , carbon dioxide; EU-ETS, EU-Emissions Trading Scheme; NER 300 program, New Entrants’ Reserve 300 program; GEEREF, Global Energy Efficiency and Renewable Energy Fund; GSIA, Global Sustainable Investment Alliance; UNEP, United Nations Environment Programme; COP22, 22nd Conference of the Parties; ISIN, International Securities Identification Numbers; TER, Total Expense Ratio; S&P, Standard and Poor; TNA, total net assets; SMB, size factor; HML, value factor; MOM, momentum factor. E-mail addresses: CarmenPilar.Marti@gmail.com, CarmenPilar.Marti@uab.cat. Contents lists available at ScienceDirect Renewable Energy journal homepage: www.elsevier.com/locate/renene https://doi.org/10.1016/j.renene.2019.05.095 0960-1481/© 2019 Elsevier Ltd. All rights reserved. Renewable Energy 143 (2019) 1299e1309