Incorporating environmental, social and corporate governance investing principles into portfolio management can improve performance, according to a Mercer study.
The report, “Shedding Light on Responsible Investment: Approaches, Returns and Impacts,” shows that 10 of 16 ESG studies reviewed by Mercer note a positive correlation between ESG factors and companies’ financial performance. Four showed a neutral relationship and two had a neutral to negative relationship.
Craig Metrick, U.S. head of Mercer’s responsible investment consulting practice, said the study acts as a road map for investors interested in ESG and responsible investing strategies.
He said the research aims to refute the view that responsible investing will always result in lower returns while conceding that responsible investing does not necessarily guarantee better performance.
“A lot boils down to manager skill and timing,” Mr. Metrick said. “Like any other type of strategy or investing, there are going to be those that underperform.”
The report reviews studies from journals, universities and non-profit organizations, such as the Journal of Financial Research, Journal of Banking and Finance, Stockholm School of Economics and European Corporate Governance Institute.