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Research papers on ESG investing and returns

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  1. The wages of social responsibility — where are they? A critical review of ESG investing

    Gerhard Halbritter, Gregor Dorfleitner · 2015 · Review of Financial Economics · 587 citations

    Abstract This paper contributes both to investigating the link between the corporate social and financial performance based on environmental, social and corporate governance (ESG) ratings and to reviewing the existing empirical evidence pertaining to this relationship. The sample used includes ESG data of ASSET4, Bloomberg and KLD for the U.S. market from 1991 to 2012. The econometrical framework applies an ESG portfolio approach using the Carhart (1997) four‐factor model as well as cross‐sectional Fama and MacBeth (1973) regressions. Previous empirical research indicates a relationship between ESG ratings and returns. As against this, the ESG portfolios do not state a significant return dif

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  2. The end of ESG

    Alex Edmans · 2022 · Financial Management · 525 citations

    Abstract ESG is both extremely important and nothing special. It's extremely important because it's critical to long‐term value, and so any academic or practitioner should take it seriously, not just those with “ESG” in their research interests or job title. Thus, ESG doesn't need a specialized term, as that implies it's niche—considering long‐term factors isn't ESG investing; it's investing. It's nothing special since it's no better or worse than other intangible assets that create long‐term financial and social returns, such as management quality, corporate culture, and innovative capability. Companies shouldn't be praised more for improving their ESG performance than these other intangibl

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  3. Towards a more ethical market: the impact of ESG rating on corporate financial performance

    Giovanni Catello Landi, Mauro Sciarelli · 2018 · Social Responsibility Journal · 369 citations

    Purpose This paper fits in a research field dealing with the impact of Corporate Ethics Assessment on Financial Performance. The authors argue how environmental, social and governance (ESG) paradigm, meant to measure corporate social performance by rating issuance, can impact on abnormal returns of Italian firms listed on Financial Times Stock Exchange Milano Indice di Borsa (FTSE MIB) Index, developing a panel data analysis which runs from 2007 to 2015. Design/methodology/approach This study aims at exploring whether socially responsible investors outperform an excess market return on Italian Stock Exchange because of their investment behavior, testing statistically the relationship between

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  4. Corporate Governance, ESG, and Stock Returns around the World

    Mozaffar Khan · 2018 · Financial Analysts Journal · 269 citations

    Non-financial performance measures, such as Environmental, Social, and Governance (“ESG”) measures, are potentially leading indicators of firms’ financial performance. I draw on the prior academic literature and the concept of ESG materiality to develop new corporate governance and ESG metrics. The new governance and ESG metrics predicted stock returns in a global investable universe over the tested period, suggesting potential investment value in curated ESG signals.

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  6. ESG performance, herding behavior and stock market returns: evidence from Europe

    Nektarios Gavrilakis, C. Floros · 2023 · Operational Research · 91 citations

    This paper tests how financial performance indicators and combined ESG score for large-cap stocks impact on stock return. In particular, we examine how market capitalization, price to book value, Sharpe ratio and ESG score of large-cap firms in Europe are related to their stock performance. We consider a panel data consisting of six European countries—Portugal, Italy, Greece, Spain, France and Germany—for the period 2010–2020. For Greek and French firms, a firm’s size tends to negatively affect its stock returns. The investors in European countries (except Italy) do not jeopardize their returns by investing in highly ESG scoring firms. We argue that the benefit of not investing in highly ESG

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  8. ESG Investing: A Statistically Valid Approach to Data-Driven Decision Making and the Impact of ESG Factors on Stock Returns and Risk

    Kamurthi Ravi Teja, Chuan-Ming Liu · 2024 · IEEE Access · 14 citations

    This study examines the impact of environmental, social, and governance (ESG) factors on economic investment from a statistical perspective, aiming to develop a tested investment strategy that capitalizes on the connection between ESG factors and financial performance. ESG investing: A statistically valid approach to data-driven decision-making (ESGI-SVADDM) investment strategy is based on a rigorous, statistically valid approach that utilizes data, math, statistics, and data science libraries to drive investment decisions, eliminating the need for personal opinions and subjectivity. The process includes establishing an investment thesis, formulating testable hypotheses (HPS), retrieving and

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  9. Performance of Equity Mutual Funds considering ESG investments, Financial Constraints, and the COVID-19 Pandemic

    T. Guimarães, R. Malaquias · 2023 · Brazilian Business Review · 12 citations

    In this paper, we analyzed the risk-adjusted performance of fUnds related to Environmental, Social and Governance (ESG-related funds), considering periods of financial constraints and the COVID-19 Pandemic. The database is comprised of3,840 equity mutual funds in the period from January/2006 to December/2020. Each year, considering daily returns, we employed the Returns-Based Style Analysis to classify each fund as an ESG-related fund or a conventional fund;all funds in the category Equities - Sustainability / Governance were also considered as ESG-related mutual funds. Using daily data, for each year, the performance was estimated based on the fourfactors model. The main results indicate th

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  12. The Impact of ESG Investing on Portfolio Performance: An Empirical Study of Emerging Markets

    Vivek Bhatia, Sanjeev Kumar · 2024 · Journal of Informatics Education and Research · 5 citations

    ESG investment, which stands for environmental, social, and governance investing, has become an important strategy in the global financial markets, and its applications are becoming more relevant in developing nations. This study investigates the impact of environmental, social, and governance (ESG) integration on portfolio performance in emerging markets. The study aims to accomplish three primary objectives: evaluating the performance of ESG-compliant portfolios in comparison to non-ESG portfolios; determining whether ESG factors enhance risk-adjusted returns; and identifying the challenges and opportunities associated with ESG investing. The study takes a quantitative approach, making use

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  13. Comparative Analysis of ESG-Focused DeFi Protocols and Traditional ESG Funds: Financial Performance, Transparency, and Impact Assessment

    Jude Enajero · 2024 · International Journal of Advances in Engineering and Management · 4 citations

    The intersection of Environmental, Social, and Governance (ESG) investing and decentralized finance (DeFi) introduces innovative pathways for integrating sustainability into financial markets. This study conducts a comparative analysis of ESG-focused DeFi protocols, such as KlimaDAO and Regen Network, and traditional ESG investment funds, including the Vanguard ESG U.S. Stock ETF and BlackRock Sustainable Advantage Large Cap Core Fund. Using data from March 2021 to March 2023 and quantitative methods such as ordinary least squares (OLS) regression, the study evaluates financial performance, transparency, and impact assessment. Results indicate that ESG-focused DeFi protocols provide enhanced

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  14. ESG impact on financial corporate performance and portfolio returns: evidence of Australia and Japan

    Margarita Chrissanthi Kazakakou Powaski, Carolina Daza Ordoñez, Laura Jáuregui Sánchez · 2021 · Vinculatégica · 4 citations

    Environmental, Social, and Governance investing has undergone a radical shift; companies and investors have focused on the impact of the disclosure of the practices and policies related to the environment, social responsibility, and governance in their operational strategies and investment. The purpose of this paper is to demonstrate the impact that the ESG policies have on public companies' stock returns in Australia and Japan. Accounting and market-based measures are used to determine the impact ESG practices have on stock market index returns. The annual data used is of companies from Australia's S&P/ASX Index and Japan's Nikkei 225 Index, covering the period from 2005 to 2019. Fixed effe

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  15. ESG Portfolios and Stock Returns: An analysis of ESGs effect on financial performance

    Filip Franzén · 2019 · Lund University Publications Student Papers (Lund University) · 3 citations

    In recent years sustainable investment has increased enormously, and firms that are considered to have high social responsibility has gained interest from investors. However, if these firms have higher financial performance or not is still unclear, and researchers still have split opinions on the relationship. The purpose of this research is to analyze this relationship, with data collected from the S&P 500 with a period of 2002-2017. Using the ASSET 4 Environmental, Social, and Governance (ESG) score to conduct a panel data regression and a Fama-French Factor-Five study, with constructing different portfolios on the ESG score. Results indicate that a portfolio constructed on the low ESG sco

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  17. Non-Financial Factors and Financial Returns: The Impact of Linking ESG Metrics to Executive Compensation on Corporate Financial Performance

    Tengteng Ding, Yiqiang Zhou, Lianghua Chen · 2025 · Sustainability · 3 citations

    Although the practice of linking Environmental, Social, and Governance (ESG) metrics to executive compensation (ESG compensation) has become increasingly common worldwide, consistent evidence of its economic consequences for corporate value remains limited. Drawing on agency theory and a sustainable governance perspective, this study examines how responsibility-oriented incentive mechanisms translate into corporate financial performance. Using textual data from a large sample of Chinese listed companies and employing the BERT deep learning model for empirical analysis, the results show that ESG compensation significantly improves subsequent financial performance. Further analysis reveals tha

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  18. Impact of ESG (Environmental, social, and governance) investing on financial performance in Bangladesh

    Tamim Forhad Shuvo, M. Habib · 2025 · Supply Chain Research · 2 citations

    Environmental, Social, and Governance (ESG) practices have become increasingly important in driving sustainable and resilient financial performance, particularly in emerging markets like Bangladesh. This study examines the impact of ESG integration on both financial and non-financial outcomes across key sectors, including banking, textiles, energy, and telecommunications. Using a mixed-methods approach, it combines quantitative analysis of return metrics, volatility, and higher-order statistical moments with qualitative insights from ESG disclosures and corporate case studies. The results show that ESG-compliant firms consistently outperform traditional counterparts, demonstrating higher ret

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  19. ESG Investing – An Evolving Paradigm of Sustainability and Returns

    Gaurika Gupta · 2025 · International Journal For Multidisciplinary Research · 2 citations

    This paper examines the evolution, implementation, and impact of Environmental, Social, and Governance (ESG) investing in global financial markets. Drawing upon secondary data from international and Indian contexts, it explores ESG’s historical development, key reporting frameworks (UN PRI, GRI, SASB), and regional adoption trends across Europe, the United States, and Asia. The study assesses ESG’s influence on financial performance, risk mitigation, corporate accountability, and sector-specific practices in energy, manufacturing, and technology. While evidence suggests ESG integration can enhance long-term returns, reduce volatility, and strengthen stakeholder trust, the paper also highligh

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  20. Measuring the impact of ESG investing on the stock performance of JSE-listed financial service providers during the Covid-19 pandemic

    Khwazi Magubane, Boingotlo Wesi · 2023 · International Journal of Research in Business and Social Science (2147- 4478) · 2 citations

    The study's objective is to examine the impact of ESG investing on the stock performance of financial service providers in South Africa (SA) during the COVID-19 pandemic. This has significant ramifications for the usefulness of ESG investing during a crisis period. To this end, the study employs the panel nonlinear autoregressive distributed lags (PNARDL). The study finds that ESG investing had a significant impact on stock performance. The error term in the PNARDL reveals that the share price of financial service providers in SA was significantly affected by ESG investing. The PNARDL shows that, on average, a 1 percent increase in ESG investing increased stock price returns by 5 percent, ce

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  21. ESG Investing: Evaluating the Financial Performance of Sustainable Portfolios

    Dini Ayu Pramitasari · 2024 · Equator Journal of Management and Entrepreneurship (EJME) · 1 citations

    This research examines the financial performance of ESG (Environmental, Social, Governance) portfolios compared to traditional non-ESG portfolios, focusing on their returns, volatility, and risk management. A qualitative approach was employed, utilizing a literature review and analysis of historical data from ESG reports and financial databases, particularly the FTSE4Good Index. The findings indicate that ESG portfolios significantly outperform traditional investments, with an average annual return exceeding conventional portfolios by approximately 4.3%. Additionally, ESG portfolios exhibit lower volatility and reduced drawdowns during market downturns, demonstrating their resilience and ris

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  22. Impact Investing in NSE-Listed ESG Indices: Abnormal Returns, Calendar Effects, and GARCH-Based Volatility Dynamics in the Indian Stock Market

    S. Maheshwari, D. R. Naik, R. Garg · 2026 · Journal of Risk and Financial Management · 1 citations

    This study examines the risk–return performance of Nifty100 ESG and the Nifty Enhanced ESG equity indices listed on India’s National Stock Exchange (NSE) relative to the conventional Nifty 100 benchmark from April 2011 to June 2023. Rather than asserting formal “abnormal returns” in the asset-pricing sense as per CAPM or multi-factor alpha estimation, this study documents systematic return outperformance and time-varying volatility dynamics using unit root tests, month-of-the-year dummy regressions with ARIMA error correction, and GARCH-family conditional volatility models. The two ESG indices delivered cumulative returns much higher than the broader Nifty 100 index. Conditional volatility p

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  23. ESG, financial and macroeconomic indicators affecting stock returns: Evidence from India’s Nifty100 ESG Index

    Maithil Naik, Swati Bhat, Pooja Shanbhag, et al. · 2026 · Investment Management and Financial Innovations · 1 citations

    Type of the article: Research ArticleAbstractESG investing has emerged as a key factor in corporate strategy and capital investment, although its effects on stock returns in emerging markets such as India remain inconclusive. This paper investigates the effects of ESG scores and the financial performance of firms on the stock returns of firms in the Indian Nifty100 ESG Sector Leaders Index. Based on balanced panel data on 14 firms for 2015–2024, the study employs pooled OLS, random-effects, and fixed-effects models, conducts the Breusch-Pagan LM and Hausman tests to determine the appropriate specification, and finally estimates a two-way fixed-effects model. The empirical findings show that

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  24. ESG investing and financial performance

    Guillaume Coqueret · 2022 · Chapman & Hall/CRC eBooks · 1 citations

    One of the central questions in ESG investing pertains to its opportunity cost: is sustainable investing penalizing from a pure pecuniary standpoint? This chapter addresses this complex and highly debated question. We start by a simple model that illustrates some typical mechanisms that can enlighten the situations when green firms can outperform brown ones. Then, we split the contributions of the impact of ethical screens on financial performance into four categories: the ones that document a positive relationship, the ones that find a negative relationship, the ones that report no particular relationship, and finally the ones that conclude that the relationship is contingent on some extern

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