• ISSN: 2010-023X (Print)
    • Abbreviated Title: Int. J. Trade, Economics and Financ.
    • Frequency: Quaterly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Managing Editor: Ms. Shira. W. Lu
    • Abstracting/ Indexing:  Crossref, Electronic Journals Library , EBSCO
    • E-mail: ijtef.editorial.office@gmail.com
HOME > Archive > 2022 > Volume 13 Number 4 (Aug. 2022) >
IJTEF 2022 Vol.13(4): 129-134 ISSN: 2010-023X
DOI: 10.18178/ijtef.2022.13.4.735

Environmental, Social, and Governance (ESG) Investing: How Adopting ESG Criteria Affects Performance and Risk

Dongli Cao and Yusheng Bi

Abstract—As the investment using environmental, social, and governance (ESG) characteristics become increasingly popular in recent years, the discussion of whether or not ESG investing is profitable for asset managers has received much attention. This paper provides a detailed analysis of ESG investing by examining the returns of ESG funds compared to the broad stock market and the volatility of returns. The paper concludes that ESG investing will result in higher returns for investors as historical data indicates that ESG funds outperform the S&P 500 both in the short and long term. The paper also finds that ESG investing can produce a lower volatility of returns compared to that of the market. The paper discusses other benefits of ESG investment. The conclusion is that adopting ESG criteria in investing is a valuable approach in terms of risk and return as well as the environmental and societal merits.

Index Terms—Environmental, Social, and Corporate Governance (ESG), sustainable investment, ESG mutual funds, sustainable investment volatility.

Dongli Cao is with the Hong Kong International School, Hongkong (e-mail: donglicao7@gmail.com).
Yusheng Bi is with Hong Kong Bond Trading Center, Shanghai Pudong Development Bank, Hongkong (e-mail: biyushengjl@hotmail.com).

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Cite: Dongli Cao and Yusheng Bi, "Environmental, Social, and Governance (ESG) Investing: How Adopting ESG Criteria Affects Performance and Risk," International Journal of Trade, Economics and Finance vol.13, no.4, pp. 129-134, 2022.

Copyright © 2022 by the authors. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

 

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