Wharton Pension Research Council Working Papers


Linda-Eling Lee

Document Type

Working Paper

Date of this Version



Interest in measuring companies’ behavior along economic, social, and governance (ESG) criteria reflects two important objectives: social values and financial performance. Nevertheless, measuring these has been difficult, leading to confusion about ESG investing’s effectiveness. New data and analytical innovations have supported efforts to separate material factors driving investment risk and return from those relevant primarily to social objectives. This paper reviews evidence on the effectiveness of social value-based versus financially relevant measures and identifies financially material factors, so as to guide pension fiduciaries and other investors on using ESG factors to meet investment objectives.


ESG, financial materiality, social objectives, sustainable investing, investment objectives, financial performance

JEL Code

G11, G15, G23, G41

Working Paper Number


Copyright/Permission Statement

All findings, interpretations, and conclusions of this paper represent the views of the author and not those of the Wharton School or the Pension Research Council. © 2021 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


The author thanks Joel Chernoff for his contributions to this paper.

Included in

Economics Commons



Date Posted: 04 October 2021