Impact on the performance of esg indices: a comparative study in Brazil and international markets

The frequent use of Socially Responsible Investment (SRI) indices by market in developed countries has motivated the investigation of the performance of portfolios using SRI indices in Brazil, where no research has been identified comparing relative performance of portfolios composed of companies with and without properly documented Environment, Social and Governance (ESG) practices. In this work we compared the performance of ESG and traditional indices for Brazil and for some reference markets in the United States, Europe and Asia through a panel data analysis for a period from May 2014 to June 2021. The results indicated that there was no significant difference in performance between the traditional and ESG indices for all the markets analysed. In addition, in order to identify the factors that could influence the performance of the ESG index portfolio in Brazil, we control for companies' ESG practice scores, leverage, size and sector of activities in both additive and interactive models. It was found that the performance of the ESG index was positively influenced by the size and leverage of these companies. The study also shows that the industry of basic materials have a significantly effect on the ESG index.