Sustainable and Governance Investment Funds in Brazil: A Performance Evaluation
Round 1
Reviewer 1 Report
In general, this paper is well researched. However, due to some shortages, this paper is not yet ready for final publication. I would suggest the authors conducting major revision subject to the following revisions.
1. What is ESG? You need to provide full name of this abbreviation when you mention it first time in the paper. Also, it is very important to explain this concept to someone who does not know anything about ESG.
2. 2.3 Sustainable Investments vis-à-vis Conventional Investments, what exactly are the differences between Sustainable Investments and Conventional Investments? Any similarity? What is the purpose to compare these two notions?
3. Consistency of overall presentation is an issue, e.g. SI; Sustainable Investments. You shift between these two terms throughout the whole paper and this is really confusing.
4. P.10, “OLS method” what is this stand for? Again, you need to write as clearly as possible.
5. P.13, “Table 6 and 7 present” grammatical error.
6. You consistently express “Bear and Bull Markets” throughout the whole paper, but what exactly are these markets mean? Please provide definition when you mentioned these two markets for the first time. In addition, you need to provide a clear standard to distinguish these two markets.
In general, this paper is well researched. However, due to some shortages, this paper is not yet ready for final publication. I would suggest the authors conducting major revision subject to the following revisions.
1. What is ESG? You need to provide full name of this abbreviation when you mention it first time in the paper. Also, it is very important to explain this concept to someone who does not know anything about ESG.
2. 2.3 Sustainable Investments vis-à-vis Conventional Investments, what exactly are the differences between Sustainable Investments and Conventional Investments? Any similarity? What is the purpose to compare these two notions?
3. Consistency of overall presentation is an issue, e.g. SI; Sustainable Investments. You shift between these two terms throughout the whole paper and this is really confusing.
4. P.10, “OLS method” what is this stand for? Again, you need to write as clearly as possible.
5. P.13, “Table 6 and 7 present” grammatical error.
6. You consistently express “Bear and Bull Markets” throughout the whole paper, but what exactly are these markets mean? Please provide definition when you mentioned these two markets for the first time. In addition, you need to provide a clear standard to distinguish these two markets.
Author Response
Dear Reviewer 1,
Firstly, I would like to thank you for the feedback. It is possible to find below my response to each point outlined in your comments.
Point 1: What is ESG? You need to provide full name of this abbreviation when you mention it first time in the paper. Also, it is very important to explain this concept to someone who does not know anything about ESG.
Response 1: In the first sentence of the article, I have made an adjustment in the text to provide the full name of the abbreviation. Moreover, in the second paragraph of the introduction, I provide an referenced explanation of the concept so that anyone could undestand the main idea of it.
Point 2: Sustainable Investments vis-à-vis Conventional Investments, what exactly are the differences between Sustainable Investments and Conventional Investments? Any similarity? What is the purpose to compare these two notions?
Response 2: In the second paragraph of “2.3 Sustainable Investments vis-à-vis Conventional Investments” I have made an adjustment to the text to clearly point what the academic literature indicate as the main differences between these two investment classes. Moreover, the purpose to compare these two notions is stated in the previous topic “2.1 Sustainable Investments”. I highlight the importance of providing empirical evidence of financial performance for Sustainable Investments against other traditional investment classes, to further promote it. I also highlight is the this same topic why should Sustainable Investments be promoted, so that the reader can better understand the possible positive impacts in the economy and society from this investment class.
Point 3: Consistency of overall presentation is an issue, e.g. SI; Sustainable Investments. You shift between these two terms throughout the whole paper and this is really confusing.
Response 3: I have adjusted this issue throughout the whole text. I have also used the support of a native english speaker reviewer to support to me this issue.
Point 4: P.10, “OLS method” what is this stand for? Again, you need to write as clearly as possible.
Response 4: I have adjusted this issue throughout the whole text. I have also used the support of a native english speaker reviewer to support to me this issue.
Point 5: P.13, “Table 6 and 7 present” grammatical error.
Response 5: I have adjusted this issue throughout the whole text. I have also used the support of a native english speaker reviewer to support to me this issue.
Point 6: You consistently express “Bear and Bull Markets” throughout the whole paper, but what exactly are these markets mean? Please provide definition when you mentioned these two markets for the first time. In addition, you need to provide a clear standard to distinguish these two markets.
Response 6: I have made an adjustment in the introduction section (which is when they first appear) explaining the meaning of these two concepts. Furthermore, I have also highlighted the standards used to distinguish these two market (in the case of this study is the Ibovespa Index (main brazilian broad market index) variation).
Author Response File: 
Author Response.pdf
Reviewer 2 Report
The study analyzes the financial performance of Sustainable Investments against Conventional Investment products in an emerging market context using a sample of Sustainable and Governance Equity Investment Funds that focus solely on the Brazilian Stock Market. The study finds that Sustainable Investments Stock Funds do not diverge from Conventional Stock Funds in terms of financial performance but present less volatility, especially in moments of exogenous economic shock. The main findings of this study corroborate the latest researches from the ANBIMA reports related to sustainability practices in the Brazilian Capital Markets. The study also contributes to the academic literature by providing empirical evidence from an emerging economy like Brazil of reasonable performance from Sustainable Investments. The study has a few limitations, such as the lack of a taxonomy and ESG regulatory framework for the Sustainable and Governance Equity Investment Funds, and the small number of Sustainable and Governance Equity Investment Funds in Brazil.
Strengths:
The study provides empirical evidence on the financial performance of Sustainable Investments in an emerging market context, which is a valuable contribution to the literature.
The study uses two different measures of financial performance (monthly returns and Jensen's alpha), which allows for a more comprehensive analysis.
The study considers both Bull and Bear Market periods, which provides a more complete picture of the performance of Sustainable Investments.
The study offers insights into the motivations of Brazilian Investment Managers in creating ESG investment vehicles.
The study provides practical implications for investors interested in Sustainable Investments.
Weaknesses:
The sample size of Sustainable and Governance Equity Investment Funds in Brazil is relatively small, which limits the generalizability of the findings.
The analysis only considers funds focused solely on the Brazilian stock market, which may not be representative of Sustainable Investments in other markets or asset classes.
The study does not consider the impact of transaction costs or management fees on the financial performance of the funds, which may affect the conclusions.
The lack of a taxonomy and ESG regulatory framework for Sustainable and Governance Equity Investment Funds in Brazil may be facilitating greenwashing, which is not addressed in the study.
The study only considers a 5-year period, which may not be sufficient to draw definitive conclusions about the long-term financial performance of Sustainable Investments.
English seems fine to me.
Author Response
Dear Reviewer 2,
Firstly, I would like to thank you for the feedback. It is possible to find below my response to your comments.
Point 1: The study analyzes the financial performance of Sustainable Investments against Conventional Investment products in an emerging market context using a sample of Sustainable and Governance Equity Investment Funds that focus solely on the Brazilian Stock Market. The study finds that Sustainable Investments Stock Funds do not diverge from Conventional Stock Funds in terms of financial performance but present less volatility, especially in moments of exogenous economic shock. The main findings of this study corroborate the latest researches from the ANBIMA reports related to sustainability practices in the Brazilian Capital Markets. The study also contributes to the academic literature by providing empirical evidence from an emerging economy like Brazil of reasonable performance from Sustainable Investments. The study has a few limitations, such as the lack of a taxonomy and ESG regulatory framework for the Sustainable and Governance Equity Investment Funds, and the small number of Sustainable and Governance Equity Investment Funds in Brazil.
Response 1: I have incorporated part of this paragraph into my abstract revision. The suggestion made has helped me to further organize and present the main idea, findings and contributions proposed by the article.
Point 2:
Strengths:
The study provides empirical evidence on the financial performance of Sustainable Investments in an emerging market context, which is a valuable contribution to the literature.
The study uses two different measures of financial performance (monthly returns and Jensen's alpha), which allows for a more comprehensive analysis.
The study considers both Bull and Bear Market periods, which provides a more complete picture of the performance of Sustainable Investments.
The study offers insights into the motivations of Brazilian Investment Managers in creating ESG investment vehicles.
The study provides practical implications for investors interested in Sustainable Investments.
Weaknesses:
The sample size of Sustainable and Governance Equity Investment Funds in Brazil is relatively small, which limits the generalizability of the findings.
The analysis only considers funds focused solely on the Brazilian stock market, which may not be representative of Sustainable Investments in other markets or asset classes.
The study does not consider the impact of transaction costs or management fees on the financial performance of the funds, which may affect the conclusions.
The lack of a taxonomy and ESG regulatory framework for Sustainable and Governance Equity Investment Funds in Brazil may be facilitating greenwashing, which is not addressed in the study.
The study only considers a 5-year period, which may not be sufficient to draw definitive conclusions about the long-term financial performance of Sustainable Investments.
Response 2: I have incorporated the highlighted strengths in my introduction section. Furthermore, I created a section “Limitations and Future Studies” where I incorporate the pointed weaknesses of the study.
Author Response File: Author Response.pdf
Reviewer 3 Report
In this manuscript, the authors analysed the financial performance of sustainable investments against conventional investment products in an emerging market context. Although the manuscript is interesting, the following comments should be considered.
-- The abstract should be rewritten. It should contain answers to the following questions: What problem was studied and why is it important? What methods were used? What are the important results? What conclusions can be drawn from the results? What is the novelty of the work and where does it go beyond previous efforts in the literature?
-- The abbreviations must appear at the very first place that the terminology is introduced and the way of introducing the terms must be consistent throughout the manuscript from abstract to conclusion.
-- The Introduction should make a compelling case for why the study is useful along with a clear statement of its novelty or originality by providing relevant information and providing answers to basic questions such as: What is already known in the open literature? What is missing (i.e., research gaps)? What needs to be done, why, and how? Clear statements of the novelty of the work should also appear briefly in the Abstract and Conclusions sections.
-- The authors should point out the major contributions of this paper by using 3 to 5 brief bullet points at the end of the Introduction section, right before the last paragraph.
-- Highlight all assumptions and limitations of your work.
-- Please revise the Literature Review Section by including some interesting studies related to this paper to state clearly the motivation of this study along with its importance in this interesting field of research. Try to discuss the following relevant publications to improve the quality of the manuscript. Analysis and classification of companies on Tehran stock exchange with incomplete information, Using Glow-worm algorithm to predict companies' financial distress, and A truthful and budget-balanced double auction model for resource allocation in cloud computing.
-- The manuscript contains quite a lot of tables. Please double check and try to provide a more detailed description of these tables where appropriate to make sure that the future readers will have a reasonable understanding of what these tables represent
--The superiority of the proposed approach should be addressed perfectly in comparison with similar established ones in the literature.
--The Results and Discussion Section needs to be improved in the following aspects, (i) Insights should be presented regarding why the proposed approach performed much better than the existing methods. (ii) The experiments can be designed in a more elaborate way to cover all important aspects of the proposed approach.
Minor editing of English language required.
Author Response
Dear Reviewer 3,
Firstly, I would like to thank you for the feedback. It is possible to find below my response to each point outlined in your comments.
Point 1: The abstract should be rewritten. It should contain answers to the following questions: What problem was studied and why is it important? What methods were used? What are the important results? What conclusions can be drawn from the results? What is the novelty of the work and where does it go beyond previous efforts in the literature?
Response 1: The abstract was rewriten following the proposed line of reasoning developed by the pointed questions. Thank you for providing this support.
Point 2: The abbreviations must appear at the very first place that the terminology is introduced and the way of introducing the terms must be consistent throughout the manuscript from abstract to conclusion.
Response 2: I have adjusted this issue throughout the whole text. I have also used the support of a native english speaker reviewer to support to me on this issue.
Point 3: The Introduction should make a compelling case for why the study is useful along with a clear statement of its novelty or originality by providing relevant information and providing answers to basic questions such as: What is already known in the open literature? What is missing (i.e., research gaps)? What needs to be done, why, and how? Clear statements of the novelty of the work should also appear briefly in the Abstract and Conclusions sections.
Response 3: I have adjusted the introduction section in order to provide a clear overview about what is already known in the open literature and a clear statement regarding the novelty/originality of the study. Moreover, I have adjusted the abstract and the conclusions sections using this same approach.
Point 4: The authors should point out the major contributions of this paper by using 3 to 5 brief bullet points at the end of the Introduction section, right before the last paragraph.
Response 4: I have added 5 bullet points at the end of the introduction section, as recommended.
Point 5: Highlight all assumptions and limitations of your work
Response 5: I created a new section “Limitations and Future Studies” in order to further highlight the limitations of the study. Moreover, all assumptions were highlighted in the methodology section.
Point 6: Please revise the Literature Review Section by including some interesting studies related to this paper to state clearly the motivation of this study along with its importance in this interesting field of research. Try to discuss the following relevant publications to improve the quality of the manuscript. Analysis and classification of companies on Tehran stock exchange with incomplete information, Using Glow-worm algorithm to predict companies' financial distress, and A truthful and budget-balanced double auction model for resource allocation in cloud computing.
Response 6: I revised the Literature Review section adding new references related to green finance in order to provide a clear overview of the motivation and importance of this study. These were added in the section “References” as:
Kashi. A., & Shah. M. E. Bibliometric Review on Sustainable Finance, Sustainability, 2023, 15 (7119). https://doi.org/10.3390/su15097119.
Kuzmina. J. et al. In Search of Sustainability and Financial Returns: The Case of ESG Energy Funds, Sustainability, 2023, 15 (2716). https://doi.org/10.3390/su15032716.
Gigante. G, Sironi. E. & Tridenti. C. At the Frontier of Sustainable Finance: Impact Investing and the Financial Tradeoff; Evidence from Private Portfolio Companies in the United Kingdom, Sustainability, 2023, 15 (3956). https://doi.org/10.3390/su15053956.
Point 7: The manuscript contains quite a lot of tables. Please double check and try to provide a more detailed description of these tables where appropriate to make sure that the future readers will have a reasonable understanding of what these tables represent.
Response 7: I have made a double check at all tables and made sure that all detailed explanations of those were stated in the text.
Point 8: The superiority of the proposed approach should be addressed perfectly in comparison with similar established ones in the literature.
Response 8: The rewriten abstract, introduction and conlusion sections have all addressed this by highlight the novelty of the proposed approach against similar previous studies.
Point 9: The Results and Discussion Section needs to be improved in the following aspects, (i) Insights should be presented regarding why the proposed approach performed much better than the existing methods. (ii) The experiments can be designed in a more elaborate way to cover all important aspects of the proposed approach.
Response 9: The results and discussion section was adapted in order to further demonstrate how the results can generate the insights highlighted in the conclusions. Moreover, the experiment design is fully explained in the methodology section.
Author Response File: Author Response.pdf
Reviewer 4 Report
The paper is a bit too extensive, so the reviewer's proposal is to shorten the conclusion and to transfer certain concluding considerations, especially regarding future directions of research, to another section of the paper (shorten). The reviewer's suggestion is to expand the literature, i.e. to add references from authors who have dealt with the issue of sustainable markets. It would be good if authors who dealt with green finance were added to the paper, because the paper itself is actually related to green finance, which mainly refers to the process of respecting environmental and social aspects when making investment decisions, which leads to increased investments in long-term and sustainable activities and thus economic growth and development of the business environment in accordance with the principles of global sustainable development.
Author Response
Dear Reviewer 4,
Firstly, I would like to thank you for the feedback. It is possible to find below my response to each point outlined in your comments.
Point 1: The paper is a bit too extensive, so the reviewer's proposal is to shorten the conclusion and to transfer certain concluding considerations, especially regarding future directions of research, to another section of the paper (shorten). The reviewer's suggestion is to expand the literature, i.e. to add references from authors who have dealt with the issue of sustainable markets. It would be good if authors who dealt with green finance were added to the paper, because the paper itself is actually related to green finance, which mainly refers to the process of respecting environmental and social aspects when making investment decisions, which leads to increased investments in long-term and sustainable activities and thus economic growth and development of the business environment in accordance with the principles of global sustainable development.
Response 1: I have shortened the conclusion section and created a new one “Limitations and Future Studies” where I transfer certain parts of the previous conclusion text. Furthermore, I have expanded the literature by adding new references related to green finance/sustainable finance in order to better explain the motivation to develop such a study. Below it is possible to observe the added references.
Kashi. A., & Shah. M. E. Bibliometric Review on Sustainable Finance, Sustainability, 2023, 15 (7119). https://doi.org/10.3390/su15097119.
Kuzmina. J. et al. In Search of Sustainability and Financial Returns: The Case of ESG Energy Funds, Sustainability, 2023, 15 (2716). https://doi.org/10.3390/su15032716.
Gigante. G, Sironi. E. & Tridenti. C. At the Frontier of Sustainable Finance: Impact Investing and the Financial Tradeoff; Evidence from Private Portfolio Companies in the United Kingdom, Sustainability, 2023, 15 (3956). https://doi.org/10.3390/su15053956.
Author Response File: Author Response.pdf
Round 2
Reviewer 1 Report
I am happy with the revision. Accept.
Author Response
Dear Reviewer 1, thank for the feedback!
Reviewer 3 Report
Although the authors addressed my comments, the following ones should be considered before acceptance of the paper.
-- Please specify the significance of the “bold” emphasis reflected inside the Tables by providing a description in the form of a table footnote. Otherwise, amend if deemed necessary.
-- Please revise the Literature Review Section by including some interesting studies related to this paper to state clearly the motivation of this study along with its importance in this interesting field of research such as lack of complete information in stock exchange markets, prediction financial distress in companies and double auction in markets. Try to discuss the following recent relevant publications to improve the quality of the manuscript. Analysis and classification of companies on Tehran stock exchange with incomplete information, Using Glow-worm algorithm to predict companies' financial distress, and A truthful and budget-balanced double auction model for resource allocation in cloud computing.
-- The authors are requested to recheck all the definition of variables and further clarify these equations. For example, please recheck the Eq. 2.
Author Response
Dear Reviewer 3,
Firstly, I would like to thank you for this second feedback. It is possible to find below my response to each point outlined in your comments.
Point 1: Please specify the significance of the “bold” emphasis reflected inside the Tables by providing a description in the form of a table footnote. Otherwise, amend if deemed necessary.
Response 1: The “bold” emphasis inside each table was only a highlight for the description of each column information. However, I understand that this might not be necessary. Therefore, I have adjusted the text from each to table removing all emphasis in bold.
Point 2: Please revise the Literature Review Section by including some interesting studies related to this paper to state clearly the motivation of this study along with its importance in this interesting field of research such as lack of complete information in stock exchange markets, prediction financial distress in companies and double auction in markets. Try to discuss the following recent relevant publications to improve the quality of the manuscript. Analysis and classification of companies on Tehran stock exchange with incomplete information, Using Glow-worm algorithm to predict companies' financial distress, and A truthful and budget-balanced double auction model for resource allocation in cloud computing.
Response 2: I have added an extra paragrapah at the “Sustainable Investments vis-à-vis Conventional Investments” section, using two of the mentioned articles. I mentioned the need of the most “complete set of company’s information” in order to further strength investors risk management process and portfolio allocation.
Point 3: The authors are requested to recheck all the definition of variables and further clarify these equations. For example, please recheck the Eq. 2.
Response 3: I have rechecked all equations and variable definitions. Moreover, I have provided further clarification regarding the variable from equations 2 and 6. All other equations are properly explained.
Author Response File: Author Response.pdf
