Determinants of Portfolio ESG Performance: An Attribution Framework

James LI

2023 | Academic | Portfolio Construction, Risk & Performance

The author illustrates his approach using the equity portfolios of US public pension funds over time and finds that US public pensions’ positive ESG performance over the past decade is mainly due to their underlying holdings boosting their ESG scores over this period. By contrast, pension portfolio weight changes in high and low ESG-scoring firms over this period contributed negatively to their ESG performance, both in absolute terms and relative to the market portfolio.