Quotation Amon, Julian, Rammerstorfer, Margarethe, Weinmayer, Karl. 2021. Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors. Sustainability. 13 (16)


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Abstract

In this article, we investigate the notion of doing well while doing good from the perspective of passive portfolio strategies. We analyze a number of asset allocation strategies based on ESG-weighting and compare their financial and ESG performance for the US and Europe. We find no significant difference in the financial performance but superior ESG performance of ESG-based strategies. It can be concluded that, compared to a naive strategy, socially responsible investors are willing to pay a small premium for the impact of the portfolio via transaction costs when rebalancing the portfolio according to their preferences for social responsibility. In addition, when comparing the ESG-based strategies to a value-weighted strategy, we observe no significant difference in ESG performance but a high degree of significance in the superior financial performance of the ESG-based strategy. We also analyze the strategies with regards to the factor loadings given by the Fama–French five-factor model and a sixth factor denoted GMB (Good minus Bad) and find significant differences across the regions and strategies. Overall, the results show strong support of ESG-based strategies being preferred by socially responsible investors but also suggest that such strategies might be preferred by conventional investors looking for a passively managed alternative compared to a value-weighted index. Furthermore, it seems that such a strategy might be a more adequate benchmark for active SRI funds.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Sustainability
Citation Index SSCI
WU-Journal-Rating new STRAT-C
Language English
Title Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors
Volume 13
Number 16
Year 2021
Reviewed? Y
URL https://www.mdpi.com/2071-1050/13/16/9388
DOI http://dx.doi.org/10.3390/su13169388
Open Access Y
Open Access Link https://www.mdpi.com/2071-1050/13/16/9388
JEL G11; G12; G15

Associations

People
Amon, Julian (Details)
Rammerstorfer, Margarethe (Details)
Weinmayer, Karl (Details)
Organization
Institute for Statistics and Mathematics IN (Details)
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