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ESG - Värdedrivare eller reglering

Stenberg, Fredrik LU and Stenberg, Filip LU (2022) NEKH02 20212
Department of Economics
Abstract
This thesis aim to evaluate how sustainability in terms of ESG-ratings affect portfolio performance. A portfolio strategy sorting stocks solely on ESG-ratings from MSCI will be evaluated with financial performance measures and regression analysis. Furthermore, the authors will use a quantitative method and incorporate stocks from the S&P 500. Portfolios will be rebalanced once a year to take migration between different ESG-ratings into account which is done to isolate ESG-effect to a higher extent.

The theoretical framework that will be used for assessing the portfolios are Sharpe ratio, Treynor's ratio, capital asset pricing model, Fama & French three factor model and Jensen´s alpha. Arguably this is a suitable method as many of the... (More)
This thesis aim to evaluate how sustainability in terms of ESG-ratings affect portfolio performance. A portfolio strategy sorting stocks solely on ESG-ratings from MSCI will be evaluated with financial performance measures and regression analysis. Furthermore, the authors will use a quantitative method and incorporate stocks from the S&P 500. Portfolios will be rebalanced once a year to take migration between different ESG-ratings into account which is done to isolate ESG-effect to a higher extent.

The theoretical framework that will be used for assessing the portfolios are Sharpe ratio, Treynor's ratio, capital asset pricing model, Fama & French three factor model and Jensen´s alpha. Arguably this is a suitable method as many of the previous studies conducted in this area are using similar theories to assess portfolio performance leading to a high degree of comparability.

This study has found a relationship between financial performance and portfolios consisting of stocks with higher ESG-ratings. However, there are contradicting results showing that the highest rated portfolio is not providing the best financial performance. Performance tends to decrease after reaching a certain level of ESG-rating, which indicates there is a tradeoff between ESG and portfolio performance at a certain level. (Less)
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author
Stenberg, Fredrik LU and Stenberg, Filip LU
supervisor
organization
course
NEKH02 20212
year
type
M2 - Bachelor Degree
subject
keywords
ESG, Portfolio performance, Sharpe ratio, Treynor's ratio, Asset Pricing models
language
Swedish
id
9071504
date added to LUP
2022-02-03 08:16:28
date last changed
2022-02-03 08:16:28
@misc{9071504,
  abstract     = {{This thesis aim to evaluate how sustainability in terms of ESG-ratings affect portfolio performance. A portfolio strategy sorting stocks solely on ESG-ratings from MSCI will be evaluated with financial performance measures and regression analysis. Furthermore, the authors will use a quantitative method and incorporate stocks from the S&P 500. Portfolios will be rebalanced once a year to take migration between different ESG-ratings into account which is done to isolate ESG-effect to a higher extent. 
 
The theoretical framework that will be used for assessing the portfolios are Sharpe ratio, Treynor's ratio, capital asset pricing model, Fama & French three factor model and Jensen´s alpha. Arguably this is a suitable method as many of the previous studies conducted in this area are using similar theories to assess portfolio performance leading to a high degree of comparability. 
 
This study has found a relationship between financial performance and portfolios consisting of stocks with higher ESG-ratings. However, there are contradicting results showing that the highest rated portfolio is not providing the best financial performance. Performance tends to decrease after reaching a certain level of ESG-rating, which indicates there is a tradeoff between ESG and portfolio performance at a certain level.}},
  author       = {{Stenberg, Fredrik and Stenberg, Filip}},
  language     = {{swe}},
  note         = {{Student Paper}},
  title        = {{ESG - Värdedrivare eller reglering}},
  year         = {{2022}},
}