The State of ESG Investing: A Portfolio Management Perspective

ESG Investment Outcomes, Performance Evaluation, and Attribution

“…Portfolio managers can then use them to inform investment decisions aligned with investor objectives. Horan et al (2022) outlined desirable qualities for ESG reporting metrics, but much work remains to be done to produce data investors and managers can use to evaluate and attribute performance. Also, the industry should coalesce around a classification scheme for investor objectives; without such a scheme, everything else has limited value.…”

Impact of ESG (Environmental, Social, Governance) on the Performance of Electric Utilities

“…Research from MSCI, an investment research firm, assesses the foundations of ESG investing, divided in four different papers. 55 They seek to answer how ESG affects equity valuation, risk and performances, how to integrate them into benchmarks and into passive and active portfolios. The research papers provide an insightful view on the different topics mentioned.…”

“…They find evidence supporting what they call the taste effect, which entails the exclusion of stocks from the portfolio based purely on the taste for such assets, and an associated underperformance at 4.8% annually. 55 The four papers developed use MSCI data, ESG ratings and indices to provide a complete analysis on ESG investing: The research provides a methodology based on a two-step approach, where a standard factor methodology is applied on top of an ESG index, and a one-step approach, where the strategy is optimised to minimise the sacrifice in factor exposure per unit of ESG improvement 56 (Bannier, Bofinger and Rock, 2019 [18]) : Doing safe by doing good: ESG investing and corporate social responsibility in the U.S. and Europe, CFS Working Paper Series, No. 621, Goethe University, Center for Financial Studies (CFS), Frankfurt a. M., http://nbn-resolving.de/urn:nbn:de:hebis:30:3-480587 57 https://www.goldmansachs.com/insights/pages/new-energy-landscape-folder/esg-revolutionrising/report.pdf 58 Fama and French provide five different factors, among which is the market factor.…”