This paper finds that environmental, social, and governance (ESG) risks generate negative long-run stock returns. A value-weighted portfolio of firms with high ESG risks exhibits a four-factor alpha of −3.5% per year, even when controlling for other risk factors, industries, or firm...

The low volatility factor in conjunction with the style factors Quality, Value and Momentum, has empirically proven to be able to moderate market risks and improve a portfolio’s overall risk-return profile. By integrating ESG into such a factor portfolio, future risks may be mitigated. We...