Impact of ESG disclosure Score on Investment Portfolio Performance

The study evaluates the performance of investment portfolios with high and low environmental, social and governance (ESG) scores, considering both developing and developed economies. Three different allocation strategies are employed, and performance is measured using cumulative returns, standard deviation, and Sharpe Ratios over the period from January 2018 to June 2023. Stocks are categorised into high score () and low score () groups. The investigation ascertained whether high or low ESG-score investment strategies yield better financial performance and whether this outcome is influenced by the economic environment. Findings reveal that high ESG-score portfolios showcase superior performance in emerging markets, while low ESG-score portfolios demonstrate outperformance in developed economies. This distinction suggests that the effectiveness of ESG-based investment strategies varies based on the economic context.