Outperformance through Investing in ESG in Need

  title={Outperformance through Investing in ESG in Need},
  author={Jason C. Hsu and Xiaoyan Liu and Keren Shen and Vivek Viswanathan and Yanxiang Zhao},
  booktitle={The Journal of Index Investing},
To maximize their effectiveness, environmental, social, and governance (ESG) strategies should target those ESG firms that are most capital constrained. Inherently, this involves seeking ESG firms that have irrationally high costs of capital and thus high expected return. We replicate results that find returns among ESG firms that are similar to those among non-ESG firms. In addition, we find that sorting stocks based on cost of equity capital generates significant positive return for both ESG… 

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