Sustainable Investment and Corporate Governance Working Papers, Sustainable Investment Research Platform
No 2007/4:
Portfolio performance and environmental risk
Rickard Olsson ()
Abstract: This paper examines the performance of US stock portfolios
constructed and rebalanced to have different environmental (EV) risk. EV
risk is proxied by EV risk ratings from GES Investment Services. Portfolios
with high EV risk generate higher raw returns than low EV risk portfolios,
but when risk and other factors are controlled for using the three
Fama-French factors and a momentum factor, the risk-adjusted returns of
both high and low EV risk portfolios are not statistically different from
zero. The evidence thus indicate that a portfolio of stocks with low EV
risk, intended to be more responsible, neither underperform or outperform
on a risk-adjusted basis.
Keywords: Socially responsible investment; environmental risk; portfolio performance evaluation; (follow links to similar papers)
6 pages, November 24, 2007
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