Performance Assessment of Firms Following Sustainalytics ESG Principles

Do highly rated ESG firms actually provide alpha opportunities for portfolios? This type of investing is not new, but has historically been much more qualitative in nature. Sustainalytics, one of the largest agencies in the space, recently partnered with Morningstar Inc., which brought their proprietary rating system to the individual investor. We examine whether Sustainalytics ESG ratings (both the level and change) have an impact on future stock performance relative to a broad index like the S&P 500