What Big Data Says About ESG

Do environmental, social, and governance (ESG) considerations help or harm investment performance? Big data might have the answer. In paper commissioned by the Environment Agency Pension Fund (EAPF), Henley Business School professor and data scientist Andreas Hoepner explored the effects of ESG investing—and divestment from “sin stocks” in particular—on the risk and returns of a portfolio. “[Data science] is not only crucial for potential divestment of sin stocks, but also for investing purely in environmentally responsible firms.”“A core component of our responsible investment policy is to ‘apply evidence-based decision making in the implementation of responsible investment,’” wrote Faith Ward, responsible investment and risk chief at EAPF. “Financial data science can help investors consider the perennial and thorny question as to whether ESG integration in investment processes can be beneficial to returns…


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