ESG Investing: From Sin Stocks to Smart Beta

35 Pages Posted: 21 Mar 2019 Last revised: 20 Jun 2019

See all articles by Fabio Alessandrini

Fabio Alessandrini

University of Lausanne; Banque Cantonale Vaudoise

Eric Jondeau

University of Lausanne - Faculty of Business and Economics (HEC Lausanne); Swiss Finance Institute

Date Written: March 21, 2019


Research on socially responsible investment in equity markets initially focused on sin stocks. Since then, the availability of data has been extended substantially and now covers environmental, social, and governance (ESG) criteria. Using ESG scores of firms belonging to the MSCI World universe, we measure the impact of score-based exclusion on both passive investment and smart beta strategies. We find that exclusion leads to improved scores of otherwise standard portfolios without deterioration of their risk-adjusted performance. Smart beta strategies exhibit a similar pattern, often in a more pronounced way. Moreover, our results demonstrate that exclusion also implies regional and sectoral tilts as well as (possibly undesirable) risk exposures of the portfolios.

Suggested Citation

Alessandrini, Fabio and Jondeau, Eric, ESG Investing: From Sin Stocks to Smart Beta (March 21, 2019). Swiss Finance Institute Research Paper No. 19-16. Available at SSRN: or

Fabio Alessandrini

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015

Banque Cantonale Vaudoise ( email )

Place St-François 14
United States

Eric Jondeau (Contact Author)

University of Lausanne - Faculty of Business and Economics (HEC Lausanne) ( email )

Extranef 232
Lausanne, 1012
+41 21 692 33 49 (Phone)


Swiss Finance Institute

c/o University of Geneva
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CH-1211 Geneva 4

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