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An Empirical Performance Analysis of ESG Investments: Investigating the Influence of ESG Scores on Portfolio Performance

  • This thesis examines the relationship between environmental, social and governance (ESG) scores and portfolio returns using ordinary least squares (OLS) regressions and statistical tests. ESG scores were collected from Refinitiv Datastream between January 2007 and February 2023 and consist primarily of companies listed in the Standard & Poor's 500 (S&P 500) Index. The risk factors were calculated using data from Kenneth R. French’s data library. OLS regressions are used to estimate abnormal returns. The portfolios are created by dividing stocks into five equal quantiles and allocating them to five portfolios according to their ESG scores. The portfolios were then reconstructed each year based on the company's ESG rating. This analysis concludes that there is no significant evidence of abnormal returns for high-rated ESG portfolios. Instead, it shows that the portfolio with the lowest 20% ESG ratings outperformed all other portfolios, including the sample market, over the indicated period.

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Author:Raphael Shirazi
Advisor:Uwe Hack
Document Type:Bachelor Thesis
Year of Completion:2023
Granting Institution:Hochschule Furtwangen
Date of final exam:2023/09/12
Release Date:2023/09/13
Tag:Abnormal returns; ESG investing; ESG scores; Financial performance; US Market
Page Number:48
Degree Program:IBM - International Business Management
Functional area:Finance & Accounting
Licence (German):License LogoUrheberrechtlich geschützt