Our seminal paper, ESG investing: does it just make you feel good, or is it actually good for your portfolio?, published in 2014, demonstrated the performance benefits of integrating environmental, social and governance (ESG) factors into investment decisions.
It found a statistically significant link between the quality of corporate governance and shareholder returns: companies with strong corporate oversight have tended to outperform their poorly governed competitors by an average of 30bps per month from 31 December 2008 to 31 December 2013. This allowed us to systematically integrate the analysis of corporate governance into our stock-selection process. Two years later, we reaffirmed this finding in ESG investing: it still makes you feel good, it still makes you money.
Today, we revisit our study, updating our results to better understand how ESG factors have impacted shareholder returns in the past 24 months. Contrary to our earlier analysis, we find that the governance premium has weakened and, for the first time, social factors now qualify as statistically significant.