Environmental transition alignment and portfolio performance

32 Pages Posted: 8 Jul 2021

See all articles by Olivier Gueant

Olivier Gueant

Université Paris I Panthéon-Sorbonne

Jean-Guillaume Peladan

Sycomore Asset Management

Alain Robert-Dautun

Sycomore Asset Management

Peter Tankov

ENSAE, Institut Polytechnique de Paris

Date Written: June 29, 2021

Abstract

We contribute to the debate on whether using ESG/SRI criteria in investment decisions improves portfolio performance. The choice of a specific ESG metric being crucial, we focus on the Net Environmental Contribution, a robust open-source measure of environmental transition alignment. From a universe of 752 European stocks, we select subsets of stocks with high and low NEC scores, and compare the performance of equal-weighted and capitalization-weighted portfolios constructed from these subsets over the 2015-2020 period. The high-NEC portfolios outperform the low-NEC ones consistently throughout the period, and particularly during 18 months starting mid-2019, both before and during the COVID crisis.

Keywords: ESG, Net Environmental Contribution, portfolio performance, factor model, environmental transition, transition risk

JEL Classification: G11

Suggested Citation

Gueant, Olivier and Peladan, Jean-Guillaume and Robert-Dautun, Alain and Tankov, Peter, Environmental transition alignment and portfolio performance (June 29, 2021). Available at SSRN: https://ssrn.com/abstract=3876731 or http://dx.doi.org/10.2139/ssrn.3876731

Olivier Gueant

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Jean-Guillaume Peladan

Sycomore Asset Management ( email )

Alain Robert-Dautun

Sycomore Asset Management ( email )

HOME PAGE: http://https://www.linkedin.com/in/alainrd/

Peter Tankov (Contact Author)

ENSAE, Institut Polytechnique de Paris ( email )

Palaiseau
France

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