The Effect of ESG on a Global Fund Market - Integrating Environmental, Social and Governance (ESG) in the investment strategy: A Global Market Research

Abstract: This paper investigates the different performances of global funds when implementing an ESG-strategy during the period 2013 to 2018. Using the from Morningstar Direct, consisting of return, Morningstar Sustainability Rating, Morningstar Portfolio Sustainability Score, Portfolio Controversy level and Environmental-, Social-, and Governance- Score, we conduct the regression analysis using the Fama French Carhart model. This paper finds evidence that the performances of the global funds are negatively affected by ESG-strategies in the short run, which are consistent with some previous studies. However, a substantial amount of literature suggest that long term benefits of implementing ESG-strategy exceeds the costs. There is also literature suggesting ESG is a profitable investment since it is less risky, thus a risk-adjusted return would imply similar or higher returns. In the long run, ESG investments are profitable.