NDLI: Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors

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Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors

Content Provider	MDPI
Author	Amon, Julian Rammerstorfer, Margarethe Weinmayer, Karl
Copyright Year	2021
Description	In this article, we investigate the notion of doing well while doing good from the perspective of passive portfolio strategies. We analyze a number of asset allocation strategies based on ESG-weighting and compare their financial and ESG performance for the US and Europe. We find no significant difference in the financial performance but superior ESG performance of ESG-based strategies. It can be concluded that, compared to a naive strategy, socially responsible investors are willing to pay a small premium for the impact of the portfolio via transaction costs when rebalancing the portfolio according to their preferences for social responsibility. In addition, when comparing the ESG-based strategies to a value-weighted strategy, we observe no significant difference in ESG performance but a high degree of significance in the superior financial performance of the ESG-based strategy. We also analyze the strategies with regards to the factor loadings given by the Fama–French five-factor model and a sixth factor denoted GMB (Good minus Bad) and find significant differences across the regions and strategies. Overall, the results show strong support of ESG-based strategies being preferred by socially responsible investors but also suggest that such strategies might be preferred by conventional investors looking for a passively managed alternative compared to a value-weighted index. Furthermore, it seems that such a strategy might be a more adequate benchmark for active SRI funds.
Starting Page	9388
e-ISSN	20711050
DOI	10.3390/su13169388
Journal	Sustainability
Issue Number	16
Volume Number	13
Language	English
Publisher	MDPI
Publisher Date	2021-08-21
Access Restriction	Open
Subject Keyword	Sustainability Applied Ethics Sustainable Finance Portfolio Management Fund Management Social Finance Asset Management Asset Pricing Factor Analysis Socially Responsible Investing
Content Type	Text
Resource Type	Article

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