Transparency is usually seen as integral to corporate responsibility best practice. It allows closer scrutiny of those firms claiming CR credentials. But, if we want optimal outcomes in terms of industry wide adoption of CR practices, it may pay to tolerate a little hypocrisy at times – rather than highlighting the difference between what a firm says about CR and what it actually does.
Article first published on 01.12.2016 / Updated on 12.03.2021 with the new version of the research paper A Bait-and-Switch Model of Corporate Social Responsibility.
6 min read Continue reading Left in the dark: Why transparency isn’t always best for institutionalizing corporate responsibility
Using environmental, social, and governance (ESG) scores of firms belonging to the MSCI World universe, we measure the impact of score-based exclusion on both passive investment and smart beta strategies. We find that exclusion leads to improved scores of otherwise standard portfolios without deterioration of their risk-adjusted performance. Smart beta strategies exhibit a similar pattern, often in a more pronounced way. Moreover, our results demonstrate that exclusion also implies regional and sectoral tilts as well as (possibly undesirable) risk exposures of the portfolios.
5 min read Continue reading The effect of screening for environmental, social and governance performance on passive and smart beta investing strategies