Do investors walking the ESG walk perform better?

– One study shows that investors that are ESG-oriented perform better.
– Companies outside the US that are ESG-oriented perform better than US ESG-oriented companies.

This was the question posed by Andreas Posavac in this note. Do investors who publicly commit to responsible investing also perform or manage risk better?

Andreas notes this is an area where IHS Markit – where he works – advises hundreds of corporates to make better sense of the ESG blackbox and help prioritize engagement and outreach. He notes that a recent academic paper goes exactly in the same direction. Interesting findings include:

– UNPRI signatories on average have better ESG portfolio profiles, based on average ESG industry scores
– PRI status is negatively correlated with risk, but no effect on performance
– Especially social and governance scores among PRI members showed statistically different results
– PRI signatories outside the US have better portfolio scores across all three E,S,G dimensions
– Strikingly, the ESG footprints of US-based PRI signatories tend to be worse than the footprints of non-PRI US investors (!)
– Despite US-investors being the largest group PRI new-joiners, there is no evidence that their portfolio scores change after signing up

There is a good discussion about some of the reasons why there might be a regional disconnect…