Warning: SRI Need Not Kill Your Sharpe and Information Ratios—Forecasting of Earnings and Efficient SRI and ESG Portfolios

Using an earnings forecasting model is useful and produces statistically significant outperformance in US stock selection. This study finds that the incorporation of environmental, social, and governance (ESG) criteria can potentially enhance stockholder returns, holding risk constant under reasonable assumptions. The novel approach here uses a normalization of ESG strengths and weaknesses ratings, applied in both robust simply weighted and...