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Comparative analysis of long-term returns, financial considerations, and measurement challenges in future ESG investing

Author

Listed:
  • Olakunle Oloruntobi

    (Universiti Malaysia Terengganu)

  • Adel Gohari

    (Universiti Malaysia Terengganu)

  • Safizahanin Mokhtar

    (Universiti Teknologi Malaysia)

  • Kasypi Mokhtar

    (Universiti Malaysia Terengganu)

  • Siti Marsila Mhd. Ruslan

    (Universiti Malaysia Terengganu)

Abstract

ESG investing, targeting financial and social gains, is influenced by a company’s natural resource usage, greenhouse gas emissions, pollution, energy efficiency, and sustainability. This study used various methods to evaluate if ESG investing boosts long-term returns by considering future financial data affecting returns and risks. Current ESG-managed assets surpass $11 trillion (T), 20% of US professionally managed assets, and are projected to exceed $82T globally. The number of new ESG funds increased from 140 in 2012 to 562 in 2022, indicating high investor demand for ESG products. Due to different methodologies, significant ESG score variations from major providers affect issuers’ results and investor decisions, leading to exposure differences in high-ESG funds. The study found a weak correlation between ESG ratings from various agencies and market indices, questioning their reliability in measuring company sustainability or risk. This suggests that differing and unclear methodologies among agencies cause rating variability. These findings are important for corporate sustainability stakeholders, investors, and analysts.

Suggested Citation

  • Olakunle Oloruntobi & Adel Gohari & Safizahanin Mokhtar & Kasypi Mokhtar & Siti Marsila Mhd. Ruslan, 2025. "Comparative analysis of long-term returns, financial considerations, and measurement challenges in future ESG investing," Journal of Asset Management, Palgrave Macmillan, vol. 26(3), pages 271-297, May.
    • Handle: RePEc:pal:assmgt:v:26:y:2025:i:3:d:10.1057_s41260-025-00397-0
    DOI: 10.1057/s41260-025-00397-0
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