Analyzing the impact of ESG strategies on the investment attractiveness of financial sector stocks

Subject. The study investigates the investment attractiveness of shares of leading financial companies from the position of the ESG rating. Objectives. The purpose is to determine the investment prospects of shares of financial sector companies that are leaders in terms of ESG ratings. Methods. The study employs methods of regression analysis and financial modeling. Based on model stock portfolios of financial sector companies of the USA, EU, Great Britain, Canada and Japan, created according to the ESG rating of companies over a 3-year period, I performed a comparative analysis of portfolios’ profitability, as well as volatility (?) and the level of possible losses of the investor in case of materialization of risks (Value at Risk). Results. Two model portfolios demonstrated similar profitability indicators, while the ESG leaders' portfolio returns are characterized by a smaller linear deviation. The beta coefficient of two analyzed stock portfolios is close to 1, the portfolio of shares of ‘ESG leaders’ is characterized by slightly higher volatility and higher Value at Risk. Conclusions. Medium-term investments in financial sector companies with the highest ESG ratings will not bring the investor higher returns with a lower risk of losses. Thus, the hypothesis that the ESG rating of a financial sector company currently determines its medium-term investment attractiveness is not confirmed.