Abstract
Although the demand for ESG (Environmental, Social and Governance) investing is growing, there are still many investors hesitant to incorporate sustainability metrics into their portfolios due to concerns over the financial performance of their investment. This study shows that ESG Weighting is an effective strategy in the United States equities market, represented by the S&P 500, over both a short and long term time horizon to yield comparable returns to other traditional portfolio weighting strategies, such as Market Capitalisation Weighting, Price Weighting, and Equal Weighting strategies. This research uniquely focuses on the implementation of ESG composite scores as a weighting mechanism. Comparing the results of the different weighting strategies over a 1-year-horizon, with an emphasis on the tumultuous Covid market slowdown, and a 6-year-horizon, the study found that ESG Weighting yielded comparable returns to the other strategies in the short term, and outperformed over the long term. The results have implications for portfolio construction and may help reduce investor hesitation by demonstrating that ESG investing need not come at the expense of performance.
How to Cite
Fourie, N., (2025) “ Sustainable Investing: Can ESG Weighted Portfolios Match Traditional Returns? ”, Capstone, The UNC Asheville Journal of Undergraduate Scholarship 38(2).
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