We studied 235 stocks–and found that ESG metrics don’t just make a portfolio less profitable, but also less likely to achieve its stated ESG aims
3 April 2024
Institutions are increasingly skeptical of ESG ratings, and recent research highlights unintended consequences of incorporating ESG metrics into portfolios. Analyzing stock data from 1998 to 2020 and ESG data, two approaches were evaluated. First, strategies based solely on returns, without considering ESG scores, resulted in higher ESG scores compared to ESG-based strategies. Second, prioritizing stocks with the highest ESG scores did not yield the most efficient portfolios in terms of risk-adjusted returns. While ESG-inclusive portfolios showed higher returns, they also
