Financial Equivalence of ESG and Non-ESG Portfolios: Evidence from US ETFs Using CAPM and Risk-Adjusted Metrics
Financial Equivalence of ESG and Non-ESG Portfolios: Evidence from US ETFs Using CAPM and Risk-Adjusted Metrics
Author(s): Matúš PANKO, Leoš ŠAFÁR, Jakub SOPKOSubject(s): Economy, Law, Constitution, Jurisprudence, Micro-Economics, Law on Economics, Financial Markets
Published by: RITHA Publishing
Keywords: ESG investing; portfolio performance; CAPM analysis; risk-adjusted returns; sustainable finance;
Summary/Abstract: This study examines the financial performance of ESG and non-ESG portfolios between 2020 and 2024 using monthly data from ten major US exchange-traded funds (ETFs). Leveraging the Capital Asset Pricing Model (CAPM) and Modern Portfolio Theory (MPT), we assess annualized returns, volatility, Sharpe ratios, and maximum drawdowns. The results show that ESG portfolios perform comparably to traditional portfolios in terms of both returns and risk-adjusted efficiency. While the non-ESG portfolio posted slightly higher returns, the difference was statistically insignificant. CAPM estimates revealed betas near unity and no evidence of abnormal returns (alpha), supporting the neutrality hypothesis. These findings suggest that investors can pursue ESG strategies without compromising financial outcomes. From a policy perspective, the results underscore the need for robust ESG disclosure frameworks to support market transparency and efficiency.
Journal: Journal of Applied Economic Sciences (JAES)
- Issue Year: XX/2025
- Issue No: 4(90)
- Page Range: 759-774
- Page Count: 16
- Language: English
