Exploring the financial performance of ESG investing in India: evidence using asset-pricing models

Iram Hasan, Shveta Singh and Smita Kashiramka

China Accounting and Finance Review, 2025, vol. 27, issue 3, 421-466

Abstract: PurposeContrary to the developed markets, where ESG (environmental, social and governance) investing has received considerable attention, the extant literature in the context of emerging markets remains fragmented and scarce. To fill this gap, the study examines the financial performance of ESG investing in an emerging market, India.Design/methodology/approachThe study evaluates the financial performance of ESG indices listed on major Indian exchanges against market benchmarks using the Capital Asset Pricing Model (CAPM) and multi-factor models (Fama–French three-factor, Carhart four-factor and Fama–French five-factor) from 2011 to 2023. It investigates performance differences through investors’ underreaction to positive earnings surprises, assesses the impact of market crises and examines the effects of mandatory CSR provisions and the Paris Agreement using difference-in-differences (DiD). Risk-return metrics are computed for robustness.FindingsThe findings indicate that ESG portfolios exhibit lower market risk than conventional portfolios and generate positive, albeit statistically insignificant, alphas. Earnings surprises explain higher abnormal returns for ESG constituents, suggesting investors’ underreaction to positive information. Additionally, ESG investments demonstrate greater resilience during market downturns, as evidenced by crisis period analyses.Originality/valueThe outcomes provide important perspectives from an emerging market in the context of a growing interest in sustainable investment practices. This study offers important implications for academia and practitioners promoting sustainable finance and investment.

Keywords: ESG; Socially responsible investing; CAPM; Fama–French; COVID-19; India (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/cafr/article/27/3/421/1248 ... l-performance-of-ESG (text/html)
https://www.emerald.com/cafr/article-pdf/27/3/421/9737953/cafr-12-2023-0153.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:cafrpp:cafr-12-2023-0153

DOI: 10.1108/CAFR-12-2023-0153

Access Statistics for this article

More articles in China Accounting and Finance Review from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().