| Abstract |
This study investigates the relationship between Environmental, Social, and Governance (ESG) momentum and Sustainable Development Goals (SDG) integration within international equity markets. Leveraging a robust dataset spanning 2002-2023, we identify pronounced ESG momentum effects in stock returns across 63 global markets. Our ESG momentum factor, derived through monthly rebalancing, demonstrates an impressive, annualized Sharpe ratio of 0.7, underscoring its financial viability. Beyond returns, the study highlights the pivotal role of ESG controversies in shaping short-term financial performance. We advanced the discourse by integrating ESG principles with the SDG framework, proposing a novel model to calculate the SDG footprint of financial portfolios. This alignment between ESG momentum and SDG implementation emerges as a significant tool for investors and policymakers, particularly considering regulatory advancements like the Corporate Sustainability Reporting Directive (CSRD). |
