ESG - Värdedrivare eller reglering

Sammanfattning

This thesis aim to evaluate how sustainability in terms of ESG-ratings affect portfolio performance. A portfolio strategy sorting stocks solely on ESG-ratings from MSCI will be evaluated with financial performance measures and regression analysis. Furthermore, the authors will use a quantitative method and incorporate stocks from the S&P 500. Portfolios will be rebalanced once a year to take migration between different ESG-ratings into account which is done to isolate ESG-effect to a higher extent. The theoretical framework that will be used for assessing the portfolios are Sharpe ratio, Treynor's ratio, capital asset pricing model, Fama & French three factor model and Jensen´s alpha. Arguably this is a suitable method as many of the previous studies conducted in this area are using similar theories to assess portfolio performance leading to a high degree of comparability. This study has found a relationship between financial performance and portfolios consisting of stocks with higher ESG-ratings. However, there are contradicting results showing that the highest rated portfolio is not providing the best financial performance. Performance tends to decrease after reaching a certain level of ESG-rating, which indicates there is a tradeoff between ESG and portfolio performance at a certain level.