This study examines the impact of ESG integration on the financial performance of exchange-traded funds (ETFs), with a focus on risk-adjusted returns. Analyzing a dataset of 560 ETFs, we apply the Fama–French three-factor, Carhart’s four-factor, and Fama–French five-factor models to assess how ESG scores influence performance. The results indicate that incorporating ESG criteria enhances risk-adjusted returns, though the extent of this impact varies by ETF strategy. High ESG-rated portfolios tend to be more profitable, but they also follow conservative investment approaches, leading to increased returns but also higher risk.
Keffala et al. (2026) studied this question.