RESEARCH
ESG Investing
Socially responsible investing provides investors with a means to manage environmental, social, and governance (ESG) related exposures, however the long-term performance potential of these strategies remains unknown. We believe the best path for socially responsible investing that improves return is through portfolio construction that combines ESG objectives with smart beta.
Investors have preferences beyond risk and return
Investors have preferences beyond risk and return—for example, investing in companies that follow socially responsible business practices. Socially responsible investing, which provides investors with a means to manage environmental, social, and governance-related exposures while also promoting social and environmental issues has grown in popularity. However our research shows that standalone ESG ratings are not robust sources of excess return.
Empirical results are mixed
The empirical research results we have on the investment merits of ESG investing are mixed for performance, but less ambiguous for risk. We prefer not to shy away from meeting investor preferences because of what remains unknown about the investment merits of ESG. We believe the best path to improved return potential is through portfolio construction—by combining ESG objectives with smart beta.
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