Examining Investment Companies’ ESG Data to Determine Investment Efficiency

Abstract

Environment, Social, and Governance (ESG) investing is a crucial topic in modern society. Every day, new government regulations and incentives fuel sustainable investing by requiring robust corporate ESG disclosures. As companies become more aware of their societal and environmental impacts, investment companies such as Blackrock and Vanguard also learn to reshape their capital allocation decisions to benefit their customers. In this paper, we examine the S&P 500 equity holdings of some of these significant asset managers with a specific focus on the ESG scores of the companies they invest in. Through the compiled data, we see that the ESG scores of asset managers are ultimately very similar. Additionally, we derive that asset managers tend to base their decisions on several other factors, including the expected returns, as most investors also demand profit. As the ESG investing landscape continues to evolve, we determine that investors approaching their investments in an ESG-conscious manner may prefer to make their investments based on their independent analysis until the birth of more ESG-conscious investing strategies.