Going Green Means Being in the Black

71 Pages Posted: 4 Aug 2020

See all articles by Ralf Conen

Ralf Conen

Otto Beisheim School of Management (WHU)

Stefan Hartmann

ARC Resonsible Investment

Markus Rudolf

affiliation not provided to SSRN

Date Written: July 2, 2020


We revisit the relationship between ESG and stock returns using a novel, monthly consensus rating for a global universe. Our results illustrate that how well or bad a firm does along the different dimensions of corporate social responsibility does affect the return of its shares. Fund managers constructing portfolios using information on a firms' corporate social performance generally outperform, however may underperform in markets, where social responsibility is not as widely accepted. Secondly, excess performance of portfolios tilted towards corporate social responsibility is not always fully explained by the interaction with common risk factors such as value, size or momentum suggesting that ESG has a systematic effect on stock returns beyond those factors. This enables active fund managers to harvest risk-adjusted alpha. Thirdly, the effect of ESG on portfolio performance is asymmetric and does not appear to be constant over time. Fourth, markets reward short and long-term performance along ESG dimensions differently. Lastly, ESG is not a globally integrated factor. Rather it differs across regions with regard to direction, magnitude and statistical significance. We do not find a scenario in which investing in stocks with high ESG ratings leads to negative risk adjusted performance, suggesting that investors can greenwash portfolios without sacrificing performance.

Keywords: ESG, SRI, stock returns, portfolio management, global investing

JEL Classification: G11, G12, G14, G32

Suggested Citation

Conen, Ralf and Hartmann, Stefan and Rudolf, Markus, Going Green Means Being in the Black (July 2, 2020). Available at SSRN: https://ssrn.com/abstract=3646015 or http://dx.doi.org/10.2139/ssrn.3646015

Ralf Conen (Contact Author)

Otto Beisheim School of Management (WHU) ( email )

Burgplatz 2
Vallendar, 56179

Stefan Hartmann

ARC Resonsible Investment ( email )

96 Corniche Fleurie
Nice, 06200
06200 (Fax)

Markus Rudolf

affiliation not provided to SSRN

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics