Wharton Pension Research Council Working Papers
 

Author(s)

Linda-Eling Lee

Document Type

Working Paper

Date of this Version

9-2021

Abstract

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 difficulty, 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.

Keywords

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

JEL Code

G11, G15, G23, G41

Working Paper Number

WP2021-18

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.

Acknowledgements

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

Included in

Economics Commons

Share

COinS
 

Date Posted:04 October 2021