Risk and Return Characteristics of Environmental, Social, and Governance (ESG) Equity ETFs

Document Type

Article

Publication Date

9-1-2020

School

Finance

Abstract

Environmental, social, and governance (ESG) ETFs attract investors who are driven by their personal values in investing, but also by investors who believe that ESG investing will produce a favorable return–risk trade-off. This article looks at the risk and return characteristics of ESG ETFs since their inception (February 2005) through July 2019 and compares them with investable proxies for US (Russell 3000 ETF—IWV) and global (SPDR® Global Dow ETF—DGT) equity markets. Using absolute and risk-adjusted performance measures, the author finds that equal- and value-weighted ESG portfolios outperformed the IWV and DGT in some periods and underperformed in others. However, during the entire period, IWV and DGT outperformed ESG portfolios and had higher absolute- and risk-adjusted performance.

Publication Title

Journal of Index Investing

Volume

11

Issue

2

First Page

66

Last Page

75

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