Blue horizons: factor analysis of water and clean energy equity portfolios

Abstract

This paper aims to assess the financial performance of diverse sustainable blue economy activities represented by ETF portfolios and evaluate whether blue firms based on natural resources, mainly water behave compared with clean energy firms and in contrast to a broad-market benchmark. The results show how blue economy water-related investments are more profitable, less volatile and follow more conservative investment policies than renewable energy investments. Findings also suggest a preference for value-driven firms within water related industries, while clean energy firms are often growth-oriented. This confirms that the blue economy firms should be preferred to clean energy firms, within the investment portfolios following a binomial risk-return strategies.