Sustainability in the market of passive investments: an application of ESG metrics to compare performances and risk profiles of equity Etfss

The market of passive instruments experienced in the last decade a substantial increment in the offer of sustainable investments as investors are integrating ESG choices in their portfolios. Past literature evidences contrasting results regarding benefits and risks of these types of assets. Using absolute and risk-adjusted performances, this research aims to create a framework to compare results of portfolios constructed on a “neutral” sample of ETFs when evaluated against different ESG proxies. The results highlighted better performance for more sustainable ETFs when assessed using MSCI Ratings and a Carbon Emissions proxy. Opposite results were obtained when using proxies for the Social and Governance characteristics