Can robo advisors expedite carbon transitions? Evidence from automated funds

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Shan, S. ORCID: 0000-0003-4928-588X, Umar, M. and Mirza, N., 2022. Can robo advisors expedite carbon transitions? Evidence from automated funds. Technological Forecasting and Social Change, 180: 121694. ISSN 0040-1625

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Official URL: https://doi.org/10.1016/j.techfore.2022.121694

Abstract

When it comes to making comparisons with traditional funds, it has been observed that Robo advisers have emerged as a viable alternative that imposes a substantially lesser load on the investors. As a result, they are capable of playing a crucial role in supporting low-carbon transitions - a phenomenon that has never been investigated prior to this. In this study, we assess the performance of automated funds, after categorizing them into different groups, based on their investment exposure to carbon-emitting enterprises. Our findings reveal that automated funds that invest in low-carbon funds tend to outperform their competitors. Moreover, when we compare the absolute returns, the return to value at risk, the adjusted Sharpe ratio, and Jensen's alpha, these results remain consistent. In addition to this, we also found that Robo funds with less exposure to polluting companies have better market timing. Therefore, we conclude that these technology-enabled investment vehicles can help with low-carbon transitions and are instrumental in achieving sustainable development goals.

Item Type:

Journal article

Publication Title:

Technological Forecasting and Social Change

Creators:

Shan, S., Umar, M. and Mirza, N.

Publisher:

Elsevier BV

Date:

July 2022

Volume:

180