RESEARCH: ESG

ESG: WHAT’S UNDER THE HOOD?

  • The ESG factor generated positive returns since 2011
  • Strong sector biases (long tech & short discretionary) explain the performance
  • Residual returns from ESG investing are essentially zero

CAN VALUE INVESTORS DO GOOD?

  • ESG factors underperformed the Value factor and market since 2009
  • Integrating ESG in Value investing decreased returns, but increased risk-return ratios
  • Residual ESG factors are likely to generate negative returns given the focus on stakeholders, not shareholders

ESG INVESTING: TOO GOOD TO BE TRUE?

  • ESG factors generated positive excess returns since 2009
  • Show positive exposure to Low Volatility & Quality and negative exposure to Value & Size
  • Factor exposure is likely structural and not temporary
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