TY - JOUR
T1 - Environmental, social, and governance factor and financial returns
T2 - what is the relationship? Investigating environmental, social, and governance factor models
AU - Bax, Karoline
AU - Broccardo, Eleonora
AU - Paterlini, Sandra
N1 - Publisher Copyright:
© 2023 Elsevier B.V.
PY - 2024/2
Y1 - 2024/2
N2 - Sustainable finance and environmental, social, and governance (ESG) issues have garnered significant attention in both industry and academia. However, the lack of consensus on these concepts has led to confusion about their impact on investors and markets, hindering the interpretation of empirical data and the development of effective regulations. This highlights the need for transparent analyses from the finance research community. By reviewing recent asset pricing literature to determine if it has effectively identified an ESG factor, the paper examines theoretical models linking ESG factors to asset performance, with differing views on whether high-ESG firms yield lower returns due to reduced risk or outperform due to sustainable practices and market sentiment. The paper also reviews empirical studies, presenting findings on whether green assets outperform brown assets in financial markets. The paper contributes to the debate on integrating ESG into investment strategies without compromising returns, providing practical insights for investors and policymakers navigating responsible investing.
AB - Sustainable finance and environmental, social, and governance (ESG) issues have garnered significant attention in both industry and academia. However, the lack of consensus on these concepts has led to confusion about their impact on investors and markets, hindering the interpretation of empirical data and the development of effective regulations. This highlights the need for transparent analyses from the finance research community. By reviewing recent asset pricing literature to determine if it has effectively identified an ESG factor, the paper examines theoretical models linking ESG factors to asset performance, with differing views on whether high-ESG firms yield lower returns due to reduced risk or outperform due to sustainable practices and market sentiment. The paper also reviews empirical studies, presenting findings on whether green assets outperform brown assets in financial markets. The paper contributes to the debate on integrating ESG into investment strategies without compromising returns, providing practical insights for investors and policymakers navigating responsible investing.
UR - http://www.scopus.com/inward/record.url?scp=85181910308&partnerID=8YFLogxK
U2 - 10.1016/j.cosust.2023.101398
DO - 10.1016/j.cosust.2023.101398
M3 - Review article
AN - SCOPUS:85181910308
SN - 1877-3435
VL - 66
JO - Current Opinion in Environmental Sustainability
JF - Current Opinion in Environmental Sustainability
M1 - 101398
ER -