Publicação
The financial effects of social screening in European stock portfolios
| Resumo: | This dissertation investigates the performance of socially screened stock portfolios of 1089 European companies from 2005 to 2019. Using a dataset of environmental, social and governance (ESG) company ratings, we form synthetic portfolios based on stocks’ social characteristics in the previous year. We employ three different approaches to form socially screened portfolios: the positive approach, the best-in-class approach and the high and low CSP industry portfolios approach. We then evaluate the financial performance of the portfolios by using alternative performance evaluation models. The results show that companies with high Environmental performance outperform those with low Environmental performance, regardless of the weighting scheme applied or the exclusion or inclusion of financial companies. Furthermore, these results persist when constructing portfolios under the best-in-class approach and the high and low CSP industry portfolios approach. Under the positive approach, long-short portfolios formed on Environmental scores yield positive and abnormal returns since 2010, regardless of the cut-off chosen, the weighting scheme applied or the exclusion or inclusion of financial companies. However, in the first subperiod (2005-2009), investors obtain negative and statistically abnormal returns. Our results suggest that this poor performance is associated with the financial effects of the 2008-2009 financial crisis. Additionally, we document positive and abnormal returns from a long-short strategy of portfolios of companies with high governance performance if their corresponding industry performance is below the average. |
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| Autores principais: | Azevedo, Bruna Filipa Matos |
| Assunto: | Portfolio performance evaluation Stock portfolios Environmental Social and Governance (ESG) criteria Socially responsible investments Social screening Avaliação de desempenho de carteiras Carteiras de ações Critérios ambientais Sociais e de governação Investimentos socialmente responsáveis Ambiental |
| Ano: | 2020 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade do Minho |
| Idioma: | inglês |
| Origem: | RepositóriUM - Universidade do Minho |
| Resumo: | This dissertation investigates the performance of socially screened stock portfolios of 1089 European companies from 2005 to 2019. Using a dataset of environmental, social and governance (ESG) company ratings, we form synthetic portfolios based on stocks’ social characteristics in the previous year. We employ three different approaches to form socially screened portfolios: the positive approach, the best-in-class approach and the high and low CSP industry portfolios approach. We then evaluate the financial performance of the portfolios by using alternative performance evaluation models. The results show that companies with high Environmental performance outperform those with low Environmental performance, regardless of the weighting scheme applied or the exclusion or inclusion of financial companies. Furthermore, these results persist when constructing portfolios under the best-in-class approach and the high and low CSP industry portfolios approach. Under the positive approach, long-short portfolios formed on Environmental scores yield positive and abnormal returns since 2010, regardless of the cut-off chosen, the weighting scheme applied or the exclusion or inclusion of financial companies. However, in the first subperiod (2005-2009), investors obtain negative and statistically abnormal returns. Our results suggest that this poor performance is associated with the financial effects of the 2008-2009 financial crisis. Additionally, we document positive and abnormal returns from a long-short strategy of portfolios of companies with high governance performance if their corresponding industry performance is below the average. |
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