K. Stuart Peskin CFA (United States of America)
Investment Specialist - Multi-Asset Strategies - Standard Life Investments USA Ltd.
A Comprehensive Analysis of the Relationship between ESG Rankings and Investment Returns
• We find that in general, highly ranked ESG companies do not outperform poorly ranked ESG companies.
• However, it may be possible to achieve superior investment returns by incorporating ESG views into the investment decision process, if one is prepared to be very selective about how and where ESG criteria are used.
As part of the decision making process in selecting an investment manager, investors now routinely include questions about how ESG considerations are taken into account in the investment process. Apart from satisfying an investor’s moral or ethical preferences, such questions are asked because many believe that a logical link exists between ESG behaviors and investment performance.
Importantly, there now exists enough time series ESG data to attempt to empirically answer the elusive questions “Does good ESG behavior result in superior investment returns?” “Is the logical link that is presumed to exist between ESG behavior and returns supported by the historical evidence?”