Does Sustainability Generate Better Financial Performance Review, Meta-analysis, and Propositions

Ulrich Atz, Tracy Van Holt, Zongyuan Zoe Liu, Christopher Bruno

2022 | Academic | Investor Behavior, Risk & Performance

We surveyed 1,141 primary peer- reviewed papers and 27 meta-reviews (based on ~1,400 underlying studies) published between 2015 and 2020. Aggregate conclusions from a sample suggest that the financial performance of ESG investing has on average been indistinguishable from conventional investing (with one in three studies indicating superior performance) – in contrast with research in the wider management literature as well as industry reports. We developed three propositions: first, ESG integration as a strategy seems to perform better than screening or divestment; second, ESG investing provides asymmetric benefits, especially during a social or economic crisis; and third, decarbonization strategies can potentially capture a climate risk premium.