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E-ISSN: 2617-9229|P-ISSN: 2617-9210
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Vol. 7, Issue 2 (2024)
Impact of ESG (Environmental, social, governance) investing on portfolio returns
S Sankar and A Swathi
The investment in ESG relies on sustainability and ethics in aiding financial decisions, influencing both portfolio performance and investor behaviour. This paper investigates how ESG factors affect portfolios' returns in terms of risk-adjusted performance, economic downturn resilience, and long-term value creation. Some evidence indicates often that ESG-alignment-related portfolios are better or as good as traditional investment portfolios, especially concerning the reduction of various environmental hazards risks, regulatory change risks, and social pressures risks.
High ESG ratings are perceived to reflect improved corporate governance, resource efficiency, and stakeholder trust, leading to lower volatility and higher financial stability. The association between ESG integration and returns, however, shows a mixed picture across regions, sectors, and asset classes. The threats include the risk of greenwashing, limited standardization of ESG metrics, and possible underperformance in specific industries where a low score for sustainability can be associated with better financial returns.
The paper indicates that ESG investing actually allows the alignment of financial goals with broader societal objectives, thus saving the current investor demand for carrying out sustainable activities. By improving regulatory regimes and ESG disclosure standards, this will create ample space for the informed integration of ESG. The findings conclude that ESG investing plays a strategic role in portfolio optimization to the environment, social improvement, and sound corporate governance.
Pages : 658-662 | 61 Views | 24 Downloads
How to cite this article:
S Sankar, A Swathi. Impact of ESG (Environmental, social, governance) investing on portfolio returns. Int J Finance Manage Econ 2024;7(2):658-662. DOI: 10.33545/26179210.2024.v7.i2.434
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