No more excuses! Performance of ESG-integrated portfolios in Australia

Darren D. Lee, John Hua Fan, Victor S.H. Wong

    Research output: Contribution to journalArticlepeer-review

    6 Citations (Scopus)

    Abstract

    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.
    Original languageEnglish
    Pages (from-to)2407-2450
    Number of pages44
    JournalAccounting and Finance
    Volume61
    Issue numberS1
    Early online date28 Jul 2020
    DOIs
    Publication statusPublished - Apr 2021

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