PT  - JOURNAL ARTICLE
AU  - Jan-Carl Plagge
TI  - Explaining ESG Equity Index Fund Performance—Is It All about Industry Allocations?
AID  - 10.3905/jesg.2022.2.3.021
DP  - 2022 Feb 28
TA  - The Journal of Impact and ESG Investing
PG  - 21--41
VI  - 2
IP  - 3
4099  - https://pm-research.com/content/2/3/21.short
4100  - https://pm-research.com/content/2/3/21.full
AB  - The analysis of an asset-weighted ESG “market portfolio” based on ESG equity index funds with US investment focus observed over a time period of 15 years (2006 to 2020) shows substantial and persistent deviations in industry allocations relative to the broad market, though with a strongly declining trend over time. An industry return attribution reveals that these deviations contributed both positively and negatively to overall performance, depending on the time period observed. Deviations in industry allocations can sometimes account for the majority of return differences between the ESG portfolio and the market, and be minimal at other times. A multiple regression analysis reveals, however, that only relatively few individual industries have had a statistically significant impact on relative returns. On the single fund level, we observe substantial variability in industry allocations, which adds to highly diverse industry-specific return attributions. As a result, investors are best served assessing the investment implications of industry allocations on a fund-by-fund basis.