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 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.
ESG, financial materiality, social objectives, sustainable investing, investment objectives, financial performance
G11, G15, G23, G41
Working Paper Number
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.
Date Posted:04 October 2021