No more excuses! Performance of ESG-integrated portfolios in Australia
Author(s)
Lee, Darren D
Fan, John Hua
Wong, Victor SH
Year published
2020
Metadata
Show full item recordAbstract
We find compelling evidence that integrating environment, social and governance (ESG) analyses into ongoing investment practices in Australia does not harm risk‐adjusted returns. High‐ESG‐rated portfolios consistently provide superior outperformance, diversification efficiencies, and lower overall risk compared to low‐ESG‐rated portfolios. In contrast to low‐rated portfolios, we find no evidence that high‐ESG‐rated portfolios underperform the market. All results remain robust to alternative time periods, market cycles, seasonality effects, ratings method and the inclusion of trading costs and management fees. Overall, our ...
View more >We find compelling evidence that integrating environment, social and governance (ESG) analyses into ongoing investment practices in Australia does not harm risk‐adjusted returns. High‐ESG‐rated portfolios consistently provide superior outperformance, diversification efficiencies, and lower overall risk compared to low‐ESG‐rated portfolios. In contrast to low‐rated portfolios, we find no evidence that high‐ESG‐rated portfolios underperform the market. All results remain robust to alternative time periods, market cycles, seasonality effects, ratings method and the inclusion of trading costs and management fees. Overall, our findings suggest that a simple ESG integration strategy may provide a natural hedge against the risks that arise from the evolving fiduciary responsibilities of professional investment managers relating to ESG risks.
View less >
View more >We find compelling evidence that integrating environment, social and governance (ESG) analyses into ongoing investment practices in Australia does not harm risk‐adjusted returns. High‐ESG‐rated portfolios consistently provide superior outperformance, diversification efficiencies, and lower overall risk compared to low‐ESG‐rated portfolios. In contrast to low‐rated portfolios, we find no evidence that high‐ESG‐rated portfolios underperform the market. All results remain robust to alternative time periods, market cycles, seasonality effects, ratings method and the inclusion of trading costs and management fees. Overall, our findings suggest that a simple ESG integration strategy may provide a natural hedge against the risks that arise from the evolving fiduciary responsibilities of professional investment managers relating to ESG risks.
View less >
Journal Title
Accounting and Finance
Note
This publication has been entered as advanced online version in Griffith Research Online.
Subject
Banking, finance and investment
Accounting, auditing and accountability
Applied economics
Social Sciences
Business & Economics
Australia
Diversification risk