How Company Size Bias in ESG Scores Impacts the Small Cap Investor

Osman T. Akgun, Thomas J. Mudge III, Blaine Townsend

2021 | Practitioner | ESG Ratings, Portfolio Construction

ESG size bias is not as significant in US small cap stocks as it is in US large cap stocks. Stocks with high (low) ESG scores outperform (underperform) the market in the US small cap space. It is possible for US small cap portfolio managers to use ESG as an alpha generating tool without taking size risk.