What’s the Cost of Buying Good ESG Companies?
We've found investors are paying too much for good ESG companies and too little for bad ESG companies. Here's how to overcome that.
A hot topic of debate around the hallways of Morningstar is the question of how environmental, social, and governance factors--the array of nonfinancial metrics that are increasingly significant to corporate performance--affect investment returns. We’ve written extensively about how indexes and funds with different ESG characteristics have performed historically. We’ve also written about theoretical frameworks that embed arguments about how ESG potentially affects returns.
But there’s another way for Morningstar to address this question: by looking at the intersection between ESG and the star ratings that Morningstar has traditionally assigned to companies.
Haywood Kelly, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.