IN FOCUS6-8 min read

Why might ESG factors increase returns?

We focus on three ESG measures - R&D, carbon intensity and worker safety - to see to what extent they can add to investment returns, and why.

09/11/2021
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Read full reportWhy might ESG factors increase returns?
8 pages597 KB

Authors

Ashley Lester, PhD
Head of Schroders Systematic Investments
Hettie Mccarthy
Quantitative Analyst, Schroders Systematic Investments

Does using ESG increase investment returns? That’s the burning question in recent years as ESG rockets to the top of the investor agenda.

We study three particular components of ESG that seems to increase returns: R&D spending, carbon intensity and worker safety. 

These seem to increase returns because they either highlight high-risk/high return companies, or they highlight information that other investors are not yet using efficiently. 

Widely distributed ratings not tied specifically to an investment thesis seem unlikely to fit this description.

So the only sensible answer is – some ESG data, used wisely, can increase returns. 

Read full reportWhy might ESG factors increase returns?
8 pages597 KB

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Authors

Ashley Lester, PhD
Head of Schroders Systematic Investments
Hettie Mccarthy
Quantitative Analyst, Schroders Systematic Investments

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