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◆ Finance research letters2026-01-02· Sharpe ratio

Revisiting ESG performance: do high scores translate to higher returns? A risk-adjusted analysis of S&P 500 portfolios

Paulo V. Carvalho, Pedro F. Falcao, Carlos Manuel Pinheiro, Diogo Carrão

原始摘要(英文原文)· Original abstract
The rise of ESG investing is often underpinned by the belief that sustainability enhances long-term financial performance. Research suggests ESG scores correlate with superior stock market returns, but the evidence remains mixed. We contribute to the debate by directly comparing the performance of top- and bottom-ranked ESG portfolios within the S&P 500 over the period 2005–2024. Using raw returns, we find that low ESG-rated portfolios consistently outperform their higher-rated counterparts in absolute terms. However, when accounting for risk, using risk-adjusted metrics — specifically the modified Sharpe ratio — no statistically significant differences emerge. These findings challenge prevailing assumptions about ESG investing and highlight the need for a more nuanced understanding of the trade-offs between sustainability and profitability in portfolio construction.
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