ESG Investing

Environmental, Social, and Governance (ESG) investing has mushroomed in the recent past. As assets under management have grown impressively, so have questions. This chapter surveys the landscape of ESG investing, starting with definitions, components, investing strategies, market size, and the increasing prominence of ESG ratings-providers. Following that, I look at the literature on ESG scores and ratings of companies, and the association between ESG and financial/stock market performance of two sides of the ESG coin: corporations that invest to build attractive sustainability attributes, and investment portfolios that comprise such corporations’ equity. Despite the apparent evidence that ESG investing does not detract from – and may even be associated with improved – performance on both corporate and portfolio fronts, almost every aspect of this arena of investing raises more questions than it answers. The chapter closes with an assessment of implications of the phenomenon of ESG investing for corporations, as well as for buyers and sellers of such investments