ESG investing: Do better ESG scores generate superior investment returns?

Project: Research

Project Details

Project Description

The importance of ESG funds is undeniable, having accumulated $71 billion of net inflows globally between April and June 2020 and with assets under management exceeding $1 trillion. However, the jury is still out on whether ESG investing generates abnormal returns. A review of the literature suggests that materiality is arguably a critical aspect that likely affects the ability of ESG scores to predict future stock performance. This project will explore a new alternative construction of ESG scores that incorporates materiality into Sustainalytics raw scores. We will examine whether investment portfolios constructed based on materiality-adjusted ESG scores can generate superior returns over holding horizons from 1-12 months. Our analysis will inform fund managers of the usefulness of this new investment signal that potentially improves portfolio performance and strengthens its ESG footprint at the same time.
Short titleESG investing
Effective start/end date30/06/2131/03/22


  • ESG
  • Climate Change
  • Finance
  • Investment