Sustainable Investing in a Changing World: ESG Screening and Investor Priorities

Abstract

This thesis investigates the potential for sustainable investing to enhance portfolio performance, focusing on the comparison between green and brown stocks. Through ESG screening, we investigate the impact of sustainability metrics on investment decisions, providing insights into evolving investor behavior. Our analysis indicates that responsible investors, who integrate ESG factors into their decision-making without making it the sole focus, achieve the highest Sharpe ratios, suggesting an optimal ESG integration level. This underscores the importance of a balanced approach in portfolio management, to optimize returns while maintaining sustainability goals. These findings are crucial for shaping investment strategies amidst increasing ESG prominence, emphasizing the need for careful ESG integration.