The Impact of ESG-Related Industry Exclusions in Minimum-Volatility Portfolios

Matthew Hanna

2020 | Practitioner | Portfolio Construction

Single and multiple ESG-related industry restrictions on minimum-volatility (MVPs) portfolios have no statistically significant impact on variance and Sharpe ratios. Minimum-volatility portfolios with or without ESG-related industry constraints have produced similar returns over the long term. Investors should feel confident that implementing ESG-related industry restrictions in defensive portfolios, particularly minimum-volatility portfolios, should produce results similar to those of defensive portfolios without such industry constraints.