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Published on 7 April 2025
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Wang,H. (2025). A Risk-Return Comparison Study of ESG Portfolios and Traditional Portfolios. Advances in Economics, Management and Political Sciences,174,14-19.
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A Risk-Return Comparison Study of ESG Portfolios and Traditional Portfolios

Hao Wang *,1,
  • 1 Faculty of Liberal Arts and Professional Studies, York University, Toronto, M1W 2H2, Canada

* Author to whom correspondence should be addressed.

https://doi.org/10.54254/2754-1169/2025.21833

Abstract

Through a systematic literature review and empirical analysis, this study explores the differences and linkages between ESG portfolios and traditional portfolios in terms of risk-return dimensions from the perspectives of different market environments, industry characteristics and risk measures. First, the study reviews the Modern Portfolio Theory (MPT) and the Capital Asset Pricing Model (CAPM) and analyzes their limitations in extreme market environments and the neglect of non-financial factors. Second, the study examines the role of ESG factors in corporate value creation and risk management, showing that ESG practices can enhance corporate reputation, reduce financial risk, and increase portfolio stability. In addition, the study compares the construction logic, risk characteristics and financial performance of ESG portfolios with those of traditional portfolios, and finds that ESG investments generally exhibit greater risk resistance during periods of market turbulence, although inconsistencies in ESG rating standards remain a challenge for investors. The findings suggest that ESG investments should focus more on data transparency and standardization, and combine ESG factors with quantitative investment strategies. At the same time, adherence to a long-term investment strategy is critical to realizing the sustainable value of ESG investing.

Keywords

ESG, Efficient Frontier, Capital Asset Pricing Model, Sustainable Investing, Portfolio Diversification

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Cite this article

Wang,H. (2025). A Risk-Return Comparison Study of ESG Portfolios and Traditional Portfolios. Advances in Economics, Management and Political Sciences,174,14-19.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 3rd International Conference on Management Research and Economic Development

Conference website: https://2025.icmred.org/
ISBN:978-1-80590-043-6(Print) / 978-1-80590-044-3(Online)
Conference date: 30 May 2025
Editor:Lukáš Vartiak
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.174
ISSN:2754-1169(Print) / 2754-1177(Online)

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