Empirical Performance of an ESG Assets Portfolio from US Market

In the face of changing investment intentions, the integration of environmental, social and governance (ESG) considerations into portfolio optimization is becoming the norm. Indeed, the purely financial dimension of investments is beginning to give way to the sustainable or responsible dimension which aims to generate long-term financial returns. Such an investment strategy has the constraint of investing only in companies which, according to the rating agencies, best meet these three criteria. To study the impact of similar investment strategies on portfolio performance, we compared the performance of 3 portfolios constructed with different ESG preferences. Built on the basis of the Best-in-class approach, the first is composed of the highest rated assets (AAA and AA) while the second has average ratings (A and BBB) and the third of the worst ESG ratings (BB, B and CCC). The results obtained in a robust mean-LPM theoretical framework, we managed to show that a preference for stocks with average ESG ratings in the composition of a portfolio to have the best risk-return trade-off.