The Influence of ESG Factors on Portfolio Performance Based on the Perspective of Markowitz Portfolio Theory

Abstract: In this paper, the inclusion of Environmental, Social, and Governance (ESG) factors in portfolios is investigated to determine their impact on portfolio performance and its mechanism. Based on the data collected by Bloomberg for 10 stocks from 2003-2023 and Markowitz's portfolio model, it is found that: (1) the inclusion of ESG constraints negatively affects portfolio performance; (2) the inclusion of ESG constraints shifts the GMVP to the right and reduces the convexity of the efficient frontier, thus lowering the portfolio's performance. This study enriches the literature on the factors affecting portfolio performance as well as responsible investment and ESG investment, and is of value to investors or organizations in making investment strategy choices.