@article {Hanna87, author = {Matthew Hanna}, title = {The Impact of ESG-Related Industry Exclusions in Minimum-Volatility Portfolios}, volume = {1}, number = {2}, pages = {87--103}, year = {2020}, doi = {10.3905/jesg.2020.1.008}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Can an investor combine minimum volatility and ESG (environmental, social, and governance) investing without sacrificing the advantage of the low-volatility factor? Defensive and ESG investing are two of the fastest growing segments in the investing world. This article seeks to determine whether defensive investors, through low-volatility or minimum-volatility portfolios (MVPs), can maintain strong results if the portfolios include an ESG industry restriction overlay. The implication of this study is that investors face no statistically significant loss of investment return or increased risk by imposing ESG industry exclusions on minimum-volatility portfolios. The author excludes 25 different sub-industries categorized as industries with environmental or social issues and determines that the exclusions, individually and collective, do not cause any significant deviation in long-term minimum-volatility investor experience. Ultimately ESG and minimum-volatility equity investors can have their cake and eat it too. They can maintain a minimum-volatility experience, while also improving the ESG profile of their portfolio. TOPICS: ESG investing, analysis of individual factors/risk premia, portfolio constructionKey Findings{\textbullet} Single and multiple ESG-related industry restrictions on minimum-volatility (MVPs) portfolios have no statistically significant impact on variance and Sharpe ratios.{\textbullet} Minimum-volatility portfolios with or without ESG-related industry constraints have produced similar returns over the long term. {\textbullet} Investors should feel confident that implementing ESG-related industry restrictions in defensive portfolios, particularly minimum-volatility portfolios, should produce results similar to those of defensive portfolios without such industry constraints.}, issn = {2693-1982}, URL = {https://jesg.pm-research.com/content/1/2/87}, eprint = {https://jesg.pm-research.com/content/1/2/87.full.pdf}, journal = {The Journal of Impact and ESG Investing} }