Do socially (ir)responsible investments pay? New evidence from international ESG data

•Using a new dataset we analyse ESG investing globally and on the industry level.•Selection of high- or low-rated stocks does not provide superior performance.•In the Asia-Pacific region and the US, ESG investors perform similar to the market.•In Europe, investors tend to pay a price for socially responsible investing.•Our results are robust along a variety of dimensions.

Using a new dataset of environmental, social and corporate governance (ESG) company ratings and state-of-the-art statistical methodology, this article analyses the performance of socially (ir)responsible investments in the Asia-Pacific region, the United States and Europe. By implementing a variety of portfolio screens on the industry level, our analysis provides the following insights. First, regardless of geographic region, industry or ESG criterion, active selection of high- or low-rated stocks does not provide superior risk-adjusted performance in comparison to passive stock market investments. Second, in the Asia-Pacific region and in the United States, investors concentrating on ethical utility derived from their portfolio choice can follow an ESG-based investment style and still obtain a performance similar to the broad market. However, depending on the industry focus and the ESG criterion that is used, investors in Europe tend to pay a price for socially responsible investing. Third, our results are robust along several dimensions, such as the employed portfolio cut-off rate, the time frame or the consideration of transaction costs.