Does ESG Investments Come at a Cost?
Abstract
This thesis investigates the financial market’s reaction to the implementation of
ESG related investment methods. In order to investigate this, we estimated the riskadjusted
performance, evaluated and compared a high-rated ESG (i.e. Virtue)
portfolio with a low-rated ESG portfolio (i.e. Sin) and a portfolio based on sin
industries defined by Hong and Kacperczyk (2009) (i.e. SinHK). We find that there
is mixed evidence on whether sustainable investing implies financial cost.
Moreover, by implementing an investment strategy based on ESG rating might
results in a tilt on size, where we also discovered a positive correlation between
ESG and Size. Furthermore, we find evidence supporting Hong and Kacperczyk
(2009) hypothesis, however, we do not find that there is any statistical significant
outperformance of any of the portfolios in regards to abnormal returns.
Description
Masteroppgave(MSc) in Master of Science in Finance - Handelshøyskolen BI, 2020