Performance of ESG-integrated smart beta strategies in Asia-Pacific stock markets

Yeng-May Tan, Kenneth Szulczyk and Yew-Hei Sii

Research in International Business and Finance, 2023, vol. 66, issue C

Abstract: Environmental, Social, and Governance (ESG) investing is about ethical investing. While ESG investing has garnered heightened attention, the research has not settled on whether ESG investing can “do well while doing good”. Using a proprietary ESG rating database of monthly firm-specific data, we examine the performance of ESG-incorporated investing strategies in Australia, Mainland China, Hong Kong, Malaysia, and Singapore. Specifically, we combine positive screening and the smart beta approach to evaluate the performance of ESG-based and non-ESG-based (traditional) equity portfolios. Our key findings reveal that high-ESG-based portfolios do not offer superior risk-adjusted returns compared to the low-rated portfolios. While a high-ESG-rated portfolio generally outperforms the market index, the ESG and traditional smart beta alphas differ little. Our results also indicate that the minimum-volatility portfolio achieves the best performance of all the factors. We use data from Refinitiv ESG and Bloomberg ESG to substantiate and support the results. Our findings add to the growing ESG literature that answers whether investors risk sacrificing returns while investing ethically.

Keywords: Environmental, social, and governance; ESG; Smart beta strategies; Sustainable investing; Asia-Pacific stock markets (search for similar items in EconPapers)
JEL-codes: G1 G11 G15 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001344

DOI: 10.1016/j.ribaf.2023.102008

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