| Abstract |
Our paper explores the presence of significant sources of priced risk related to ESG and SDG performance. we document, strong ESG momentum time series and cross-sectional effects in international stock returns during the years 2002 to 2023. An out of sample monthly rebalancing ESG momentum Factor mimicking portfolio (double sorted on market capitalization and ESG momentum) yields an annualized Sharpe ratio equal to 0.7 for the sample period. Moreover, we underline the importance that both ESG related
performance, as well as ESG controversies are important determinants of financial performance. Last by not least, by transposing the ESG framework into a more holistic framework integrating the SDGs, we describe how our models can be used to trivially calculate the SDG footprint of financial portfolios, which is expected to be very relevant the years following the introduction of the CSRD. |
