Download pdf
Can Warren Buffett’s Investment Decisions Independent of ESG? Evidence from Berkshire Hathaway
- 1 Business School, Univeristy of Sydney, Sydney, NSW 2008, Australia
* Author to whom correspondence should be addressed.
Abstract
The past decade has witnessed a growing recognition of ESG (Environmental, Social, and Governance) investing, yet the application of ESG principles within Berkshire Hathaway, under the leadership of renowned investor Warren Buffett, has not been prominently evident. This study seeks to ascertain whether the historical investment decisions made by Buffett's Berkshire Hathaway, seemingly disassociated from active ESG involvement, may have nonetheless been subject to the influence of ESG factors. Employing methodologies encompassing correlation and regression analyses, this research unveils a discernible positive relationship between Berkshire Hathaway's investment quantities and the ESG scores of the invested firms. Moreover, companies demonstrating a positive trajectory in ESG considerations tend to be more aptly enlisted in the subsequent year's investment roster, while those witnessing a decline in ESG scores are prone to exclusion. In a comparative exploration of financial variables and ESG metrics, this study chose profit margin, ultimately revealing that ESG scores exert a notably more pronounced impact on Berkshire Hathaway's investment deliberations, specifically pertaining to share quantities, in contrast to the effect exerted by profit margin.
Keywords
ESG investing, Berkshire Hathaway, Warren Buffett, Correlation, Regression Analysis
[1]. Faure, J. ESG Investing: An overview of current and past trends, performance and challenges. (2021).
[2]. Cornell, B. ESG investing: Conceptual issues. The Journal of Wealth Management, 23(3), 61-69 (2020).
[3]. Cho, E. Time-varying preferences for ESG investments: evidence from an emerging market. Journal of Derivatives and Quantitative Studies: 선물연구, (ahead-of-print) (2023).
[4]. Dai, Y. Can ESG investing beat the market and improve portfolio diversification? Evidence from China. The Chinese Economy, 54(4), 272-285 (2021).
[5]. Andersson, E., Hoque, M., Rahman, M. L., Uddin, G. S., & Jayasekera, R. ESG investment: what do we learn from its interaction with stock, currency and commodity markets?. International Journal of Finance & Economics, 27(3), 3623-3639 (2022).
[6]. Rosenbaum, E. For Buffett, Berkshire, beating Blackrock ESG may be as hard as beating S&P 500, CNBC. August 9, 2021. Retrieved on August 4, 2023. Retrieved from: https://www.cnbc.com/2021/08/09/for-buffett-beating-blackrock-esg-may-be-as-hard-as-beating-sp-500-.html
[7]. Buffett, W. Berkshire Hathaway Inc. Shareholder Letters. Retrieved on July 14, 2023. Retrieved from https://www.berkshirehathaway.com/letters/letters.html
[8]. Edwards, J. Risks and rewards of Berkshire Hathaway. August 16, 2022. Retrieved on August 2, 2023. Retrieved from https://www.investopedia.com/articles/markets/100115/biggest-risks-investing-berkshire-hathaway-stock.asp
[9]. Cornell, B. ESG preferences, risk and return. European Financial Management, 27(1), 12-19 (2021).
[10]. Leins, S. ‘Responsible investment’: ESG and the post-crisis ethical order. Economy and Society, 49(1), 71-91 (2020).
[11]. Kaiser, L. ESG integration: value, growth and momentum. Journal of Asset Management, 21(1), 32-51 (2020).
Cite this article
Chang,Z. (2023).Can Warren Buffett’s Investment Decisions Independent of ESG? Evidence from Berkshire Hathaway.Advances in Economics, Management and Political Sciences,61,39-46.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
Disclaimer/Publisher's Note
The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content
About volume
Volume title: Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and
conditions of the Creative Commons Attribution (CC BY) license. Authors who
publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons
Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this
series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published
version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial
publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and
during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See
Open access policy for details).