Journal article

Authors list: Bannier, Christina E.; Bofinger, Yannik; Rock, Björn

Publication year: 2023

Pages: 165-172

Journal: Journal of Asset Management

Volume number: 24

Issue number: 3

ISSN: 1470-8272

eISSN: 1479-179X

Open access status: Hybrid

DOI Link: https://doi.org/10.1057/s41260-023-00303-6

Publisher: Palgrave Macmillan

Abstract: 
We investigate the returns from investing according to corporate social responsibility (CSR) criteria using factor model estimations for a large sample of U.S. firms over the period 2003-2017. To identify the CSR intensity that allows investors to optimize their portfolio returns for a given amount of risk, we relate factor-adjusted portfolio returns to a variety of risk measures. This consideration is important as equity risks have been shown to significantly decrease with CSR. Surprisingly, our results indicate that the lowest CSR-rated portfolios are able to outperform their higher CSR-rated counterparts: Not only do they show higher factor-adjusted returns but they also deliver higher return-to-risk ratios. This indicates that equity returns in our sample decrease even more strongly than the corresponding risks with rising CSR activity.

Harvard Citation style: Bannier, C., Bofinger, Y. and Rock, B. (2023) The risk-return tradeoff: are sustainable investors compensated adequately?, Journal of Asset Management, 24(3), pp. 165-172. https://doi.org/10.1057/s41260-023-00303-6

APA Citation style: Bannier, C., Bofinger, Y., & Rock, B. (2023). The risk-return tradeoff: are sustainable investors compensated adequately?. Journal of Asset Management. 24(3), 165-172. https://doi.org/10.1057/s41260-023-00303-6