This research report studies the risk-adjusted performance of the major international
equity indices against their ESG screened equivalents (MSCI World, MSCI USA,
MSCI Emerging Markets, and MSCI Europe). The daily closing prices, returns,
standard deviations, and Sharpe ratio characteristics are analyzed from 2013 to 2020.
The current literature available from highly rated journals on the subject is also
considered, which provided mixed results on the subject matter. We found no
academic papers focusing specifically on analyzing the performance of indices and
their ESG screened equivalents. With this paper, we intend to fill this gap in the
current research available.
We conclude that for the passive investor, choosing ESG screened indices over the
conventional equivalent has consistently provided better risk-adjusted returns over
the long-term period. These findings are robust with the consistently higher Sharpe
ratios over the eight-year period for each index. We predict ESG investments may
continue to outperform due to changing retail and institutional investor preferences.
Keywords: Sustainable, Passive, Investment, ESG, Asset, Management, Wealth.