Performance Assessment of Firms Following Sustainalytics ESG Principles

Abstract

Do highly rated ESG firms actually provide alpha opportunities for portfolios? This type of investing is not new, but has historically been a much more qualitative in nature. Sustainalytics, one of the largest agencies in the space, recently partnered with Morningstar Inc., which brought their proprietary rating system to the individual investor. We examines whether Sustainalytics ESG ratings (both the level and change) have an impact on future stock performance relative to a broad index like the S&P 500.

This paper was accepted by The Journal of Investing in their special ESG issue.

Keywords: ESG investing, performance measurement, asset pricing, sustainalytics, socially responsible investing, environment, social, governance

JEL Classification: G11, G12, G14, G39