ESG business diversification and investment performance

Akifumi Isogai, Masatoshi Nozaki and Rei Yamamoto

Finance Research Letters, 2025, vol. 77, issue C

Abstract: ESG investment has attracted attention in recent years, but various problems have been pointed out with the ESG scores. We focus on ESG revenue data −an alternative data that has become available in recent years− and discuss its potential to solve the problem of the ESG scores. We propose ESG business diversification as a new ESG investment measure to evaluate the proactivity of ESG activities and verify its effectiveness in the US and European markets. The results show that portfolios with high ESG business diversification achieve higher returns that cannot be explained by standard risk factors in the US market.

Keywords: ESG investment; ESG-related revenue; ESG business diversification (search for similar items in EconPapers)
JEL-codes: G11 G12 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325003952

DOI: 10.1016/j.frl.2025.107132

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