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ESG factors and risk-adjusted performance: a new quantitative model

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  • N. C. Ashwin Kumar
  • Camille Smith
  • Leïla Badis
  • Nan Wang
  • Paz Ambrosy
  • Rodrigo Tavares

Abstract

Conventional finance wisdom indicates that less risk leads to lower returns. Against this belief, new mathematical analysis, introduced in this article, demonstrates that companies that incorporate Environmental, Social and Fair Governance (ESG) factors show lower volatility in their stock performances than their peers in the same industry, that each industry is affected differently by ESG factors, and that ESG companies generate higher returns. The study assessed, for a period of 2 years, 157 companies listed on the Dow Jones Sustainability Index and 809 that are not.

Suggested Citation

  • N. C. Ashwin Kumar & Camille Smith & Leïla Badis & Nan Wang & Paz Ambrosy & Rodrigo Tavares, 2016. "ESG factors and risk-adjusted performance: a new quantitative model," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 6(4), pages 292-300, October.
    • Handle: RePEc:taf:jsustf:v:6:y:2016:i:4:p:292-300
    DOI: 10.1080/20430795.2016.1234909
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    References listed on IDEAS

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    1. Robert G. Eccles & Ioannis Ioannou & George Serafeim, 2012. "The Impact of Corporate Sustainability on Organizational Processes and Performance," NBER Working Papers 17950, National Bureau of Economic Research, Inc.
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