Do socially (ir)responsible investments pay? New evidence from international ESG data

Benjamin R. Auer and Frank Schuhmacher

The Quarterly Review of Economics and Finance, 2016, vol. 59, issue C, 51-62

Abstract: Using a new dataset of environmental, social and corporate governance (ESG) company ratings and state-of-the-art statistical methodology, this article analyses the performance of socially (ir)responsible investments in the Asia-Pacific region, the United States and Europe. By implementing a variety of portfolio screens on the industry level, our analysis provides the following insights. First, regardless of geographic region, industry or ESG criterion, active selection of high- or low-rated stocks does not provide superior risk-adjusted performance in comparison to passive stock market investments. Second, in the Asia-Pacific region and in the United States, investors concentrating on ethical utility derived from their portfolio choice can follow an ESG-based investment style and still obtain a performance similar to the broad market. However, depending on the industry focus and the ESG criterion that is used, investors in Europe tend to pay a price for socially responsible investing. Third, our results are robust along several dimensions, such as the employed portfolio cut-off rate, the time frame or the consideration of transaction costs.

Keywords: ESG investment; Performance; International robustness (search for similar items in EconPapers)
JEL-codes: C10 G11 G15 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:59:y:2016:i:c:p:51-62

DOI: 10.1016/j.qref.2015.07.002

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