SOCIALLY RESPONSIBLE INVESTMENT SCREENS AND GLOBAL EQUITIES INVESTING

Abstract

This study examines whether ESG (Environmental, Social and Governance) performance plays a role in influencing investment performance globally. We analyzed constituents of the MSCI All Country World Index, in a sample of 253,929 firm month observations from 2002 to 2010. I find that investors can enhance risk-adjusted returns by adopting appropriate ESG investment screens and underweighting socially irresponsible equities in their portfolios. I also show that non-disclosure of ESG information can have a detrimental effect on stock valuation and risk-adjusted returns. I further show that specific countries have country-specific ESG concerns, which influences the appropriate choice of ESG investment screens.