ESG Investing: A Simple Approach

Abstract

Socially conscious individual investors face a host of challenges, not least of which are a stock buy list screened by environmental, social, and governance (ESG) criteria, and investment strategies that are easily implementable. In this study, we addressed these issues by utilizing a publicly available ESG stock list (100 Best Corporate Citizens) with investment strategies involving low-volatility investing, mean-variance optimization, and equally weighted approach, and introducing an innovative method in estimating the return premium due to survivorship bias. Over the period under review, the various strategies and shortlisted ESG stock mutual funds outperformed the S&P 500 index.

TOPICS: ESG investing, mutual funds/passive investing/indexing, performance measurement