ESG Momentum in International Equity Returns and the SDG content of financial asset portfolios

Phoebe Koundouri (pkoundouri@aueb.gr), Conrad Landis and Nikitas Pittis (npittis@unipi.gr)
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Nikitas Pittis: University of Piraeus, Greece

No 2523, DEOS Working Papers from Athens University of Economics and Business

Abstract: This study investigates the relationship between Environmental, Social, and Governance (ESG) momentum and Sustainable Development Goals (SDG) integration within international equity markets. Leveraging a robust dataset spanning 2002-2023, we identify pronounced ESG momentum effects in stock returns across 63 global markets. Our ESG momentum factor, derived through monthly rebalancing, demonstrates an impressive, annualized Sharpe ratio of 0.7, underscoring its financial viability. Beyond returns, the study highlights the pivotal role of ESG controversies in shaping short-term financial performance. We advanced the discourse by integrating ESG principles with the SDG framework, proposing a novel model to calculate the SDG footprint of financial portfolios. This alignment between ESG momentum and SDG implementation emerges as a significant tool for investors and policymakers, particularly considering regulatory advancements like the Corporate Sustainability Reporting Directive (CSRD).

Date: 2025-02-07
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Working Paper: ESG Momentum in International equity returns and the SDG content of financial asset portfolios (2023)
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