No More Excuses! Performance of ESG-Integrated Portfolios in Australia

Accounting & Finance, forthcoming

59 Pages Posted: 5 Mar 2018 Last revised: 5 Jun 2020

See all articles by Darren Lee

Darren Lee

Charles Sturt University - Faculty of Business, Justice and Behavioural Sciences

John Hua Fan

Griffith University - Department of Accounting, Finance and Economics

Victor Wong

Griffith University

Date Written: June 5, 2020

Abstract

We find compelling evidence that integrating Environment, Social and Governance (ESG) analyses into ongoing investment practices in Australia does not harm risk-adjusted returns. High-ESG-rated portfolios consistently provide superior outperformance, diversification efficiencies, and lower overall risk compared to low-ESG-rated portfolios. In contrast to low-rated portfolios, we find no evidence that high-ESG rated portfolios underperform the market. All results remain robust to alternate time periods, market cycles, seasonality effects, ratings method and the inclusion of trading costs and management fees. Overall, our findings suggest that a simple ESG-integration strategy may provide a natural hedge against the risks that arise from the evolving fiduciary responsibilities of professional investment managers relating to ESG risks.

Keywords: Australia; ESG; SRI; Portfolio management; Diversification risk; Sector analysis; Fiduciary duty

JEL Classification: G30; G11; Q56

Suggested Citation

Lee, Darren and Fan, John Hua and Wong, Victor, No More Excuses! Performance of ESG-Integrated Portfolios in Australia (June 5, 2020). Accounting & Finance, forthcoming, Available at SSRN: https://ssrn.com/abstract=3128759 or http://dx.doi.org/10.2139/ssrn.3128759

Darren Lee

Charles Sturt University - Faculty of Business, Justice and Behavioural Sciences ( email )

Panorama Avenue
Bathurst, NSW 2678
Australia

John Hua Fan (Contact Author)

Griffith University - Department of Accounting, Finance and Economics ( email )

Brisbane, Queensland 4111
Australia
+61 (0)7 3735 4638 (Phone)
+61 (0)7 373 57760 (Fax)

Victor Wong

Griffith University ( email )

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

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