Is ESG an Equity Factor or Just an Investment Guide?

Is ESG an Equity Factor or Just an Investment Guide?

Environmental, social, and governance (ESG) information demands attention within the asset manage-ment industry since it has become widely accepted that making an allowance for ESG criteria within an equity portfolio enhances returns. The authors test this proposition by incorporating ESG criteria i...

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Bibliographic Details
Published in:Journal of Investing Vol. 28; no. 2; pp. 32 - 42
Main Authors: Breedt, André, Ciliberti, Stefano, Gualdi, Stanislao, Seager, Philip
Format: Journal Article Trade Publication Article
Language:English
Published: London Pageant Media 01-01-2019
Subjects:
Asset management
Equity
Hypotheses
Institutional investments
Investment policy
Ratings & rankings
Reputation management
Social investing
United States > US
Online Access:Get full text
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Summary:Environmental, social, and governance (ESG) information demands attention within the asset manage-ment industry since it has become widely accepted that making an allowance for ESG criteria within an equity portfolio enhances returns. The authors test this proposition by incorporating ESG criteria into a worldwide market neutral portfolio using an “o?-the-shelf” third-party database of individual security ratings. Our results show that incorporating ESG information into a worldwide equity-market-neutral portfolio yields no additional return because any bene?ts from tilting toward a better-rated ESG portfolio is already wholly captured by other well-known equity factors. Doing so, however, does not hurt returns. They conclude that ESG should not be considered as a unique equity factor.
ISSN:1068-0896
2168-8613
DOI:10.3905/joi.2019.28.2.032