ESG Investing: From Sin Stocks to Smart Beta

Fabio Alessandrini and Eric Jondeau
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Fabio Alessandrini: University of Lausanne; Banque Cantonale Vaudoise

No 19-16, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Research on socially responsible investment in equity markets initially focused on sin stocks. Since then, the availability of data has been extended substantially and now covers environmental, social, and governance (ESG) criteria. Using ESG scores of firms belonging to the MSCI World universe, we measure the impact of score-based exclusion on both passive investment and smart beta strategies. We find that exclusion leads to improved scores of otherwise standard portfolios without deterioration of their risk-adjusted performance. Smart beta strategies exhibit a similar pattern, often in a more pronounced way. Moreover, our results demonstrate that exclusion also implies regional and sectoral tilts as well as (possibly undesirable) risk exposures of the portfolios.

Pages: 49 pages
Date: 2019-03, Revised 2019-03
New Economics Papers: this item is included in nep-fmk and nep-rmg
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1916

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