Potential Effects of ESG (Environmental, Social, and Governance) Policies on the Returns of an Investment Portfolio

Abstract

The objective of this work is the corporate ESG policies as they relate to the company’s financial and the consequent stock performance. The subject of the work is the effects of such policies on stock returns and stock portfolio performance. In order, to tackle the problem, the author taken several steps, namely: Study of history and underlying principles of the ESG policies; Gathered information concerning common investor approaches to the adoption of the ESG mandates to their investment strategies; Tracked the performance of the broader market indices that follow ESG mandates; Considered particular example of the financial performance of an ESG adhering company; Developed recommendations relating to the appropriate selection of positions to the portfolio with ESG mandate; Overview of the findings and the recommendations for portfolio construction using the ESG principals as a selection criteria are presented in conclusion.

Keywords

• esg policies
• stock portfolio
• market indices
• financial performance
• global financial crisis