Drawing up the bill: Does sustainable investing affect risk and return?

In the past decade, we have witnessed a remarkable rise in sustainable or “Environmental, Social, and Governance” (ESG) investing, especially among institutional investors such as pension funds and insurance companies. Whether sustainable investing affects the risk and return of these institutional investors is an important question. Both in the financial industry and in academic research, a popular viewpoint embraces the idea of “doing well while doing good” based on the assertion that sustainable investing is associated with greater returns. Yet, there are reasons to be skeptical about these conclusions.

The purpose of this research project is to carry out a thorough, comprehensive analysis of how sustainable investing is related to financial risk and return for global stock markets over a prolonged time period, using different ESG databases, different ESG investment strategies, and different measures of financial risk. In addition, we will study how this relation has changed over time in the past decades. This project will thus synthesize the large and diverse body of existing evidence and will provide a clear, nuanced, and up-to-date picture of the financial consequences of sustainable investing.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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