Focusing on Environmental, Social and Governance (ESG) responsible investments, this study examines the historical and forecasted volatility and dynamic correlations between Emerging Markets in Europe, Asia and Latin America. By complementing the previous studies that provide evidence for how high ESG-ratings can reduce volatility in stock prices, regardless of which market, we seek to find if this is true in Emerging Markets. We additionally incorporate an analysis of dynamic correlations between Emerging Markets to see potential diversification benefits, which can be crucial in risk management. Data selection is based on daily closing prices of six different Emerging Markets indices. Three indices capturing the traditional Emerging Markets and three more only consisting of firms with a high ESG-rating, considered to be ESG Leaders. The sampled period is between January 2020 to January 2024. Data was processed through the DCC- GARCH(1,1) model to measure historical and forecasted volatility and dynamic correlations. The model uses past information to predict future values, meaning that past volatility and correlations influence forecasted volatility and correlations. This allows for a nuanced understanding of how the volatility and correlations have evolved and how they are forecast to change between these Emerging Markets. Key findings suggest that Asia can work as the diversification benefactor, as it is the least volatile Emerging Market and the ESG Leaders in Asia are showing a lower dynamic correlation with the ESG Leaders in the other Emerging Markets. Further results indicate that Europe is the most volatile Emerging Market, including the ESG Leaders. Furthermore, ESG Leaders in Europe and Latin America were seen to have the best DCC-GARCH filtered daily returns, while also having the highest dynamic correlation. This means that a portfolio with these two assets tends to be more volatile as shocks in daily returns move in tandem.

Utifrån den tidigare forskningen har det varit skiljaktigheter angående hur hållbara investeringar presterar i förhållande till avkastning och risk jämfört med konventionella investeringar. Samtidigt har intresset för hållbara investeringarna ökat vilket medför att det finns ett intresse att analysera hur hållbara investeringar förhåller sig inom avkastning och risk.Denna studie avser att beskriva och analysera hur hållbara aktiefonder förhåller sig i avkastning och risk jämfört med konventionella aktiefonder. Vidare studeras om det råder ett samband mellan hållbarhet och avkastning. I denna kvantitativa studie analyseras den svenska och irländska aktiefondmarknaden under 2016–2022 med totalt 310 slumpmässigt valda aktiefonder, både hållbara och konventionella, med måttet Jensens Alpha. Studiens resultat visade att ett statistiskt signifikant samband mellan hållbarhet och avkastning inte kan fastställas. Följaktligen visade det ingen statistisk signifikant skillnad i avkastning för det svenska aktiefonderna medan irländska hållbara aktiefonder hade en statistisk signifikant lägre avkastning jämfört med de konventionella motsvarigheterna. Vidare visade irländska hållbaraaktiefonder en lägre risk medan svenska hållbara aktiefonder innehade en högre risk jämfört med marknadernas konventionella aktiefonder. / There have been conflicting results from previous research regarding sustainable investing and its financial return compared to regular investment alternatives. Simultaneously, the trend towards sustainable investing has grown significantly in recent times, prompting a keen interest in understanding the effect of sustainable investing on investors, specifically in terms of returns and risks. This study aims to provide insights into sustainable investments in equity funds, specifically in terms of returns and risks, when compared to conventional equity funds. Using Jensen's Alpha methodology, a quantitative study was conducted on 310 randomly selectedequity funds, from both sustainable and conventional categories in Sweden and Ireland during the period of 2016-2022. The main findings showed that there is no strong statistical correlation between sustainability and financial returns. Furthermore, the study revealed that there was no statistically significant difference in returns for Swedish equity funds, whereas Irish sustainable equity funds exhibited statistically significantly lower returns in comparison to their conventional counterparts. Regarding risk, the study demonstrates that Irish sustainable equity funds carried lower risk, while Swedish sustainable equity funds performed with a higher risk when compared to their conventional counterparts.