Asset allocation with environmental, social, and governance concerns: exploring environmental, social, and governance investment strategies in portfolio management

Abstract

This research explores different ESG investment strategies in portfolio manage ment, analyzing their performance and risk variances for optimal risk-return out comes. Using MSCI ESG indexes, the study reveals a slight decrease in financial returns with higher screening intensity. Well-diversified ESG indexes showed no reduced returns compared to a non-restricted index. Surprisingly, monthly vari ance across indexes remained equal regardless of the screening intensity. Jensen's alpha estimation found no significant differences in risk-adjusted returns among the observed ESG indexes. These findings build on previous literature and shed light on the complexities of ESG strategies within investment landscapes.