PT  - JOURNAL ARTICLE
AU  - Arik Ben Dor
AU  - Jingling Guan
AU  - Yunpeng Sun
TI  - Is Incorporating ESG Considerations Costly?
AID  - 10.3905/jpm.2022.1.377
DP  - 2022 Jun 10
TA  - The Journal of Portfolio Management
PG  - jpm.2022.1.377
4099  - https://pm-research.com/content/early/2022/06/10/jpm.2022.1.377.short
4100  - https://pm-research.com/content/early/2022/06/10/jpm.2022.1.377.full
AB  - A common approach to measuring the effect of ESG (or ESG premium) in equities is to use the difference between a broad index and its ESG version. This approach, however, does not control for mismatches in systematic risk exposures and sector weights that can contaminate the results between the two indexes. The authors introduce a new approach that accurately measures ESG return premium in equities and find that in the past decade it was positive in both the United States and Europe. The authors also identify a positive and distinct return effect from ESG momentum and show that both effects are complementary. They also discuss how investors could use this approach to construct portfolios to harvest pure ESG returns.