Performance of the ESG Investments: The Risk and Return Difference in Capital Markets of Developed and Emerging Economies

This work aims to verify the performance of financial assets classified as ESG, comparing the risk and return of the ESG Index with the financial assets index benchmark traded in the reference market. The purpose is to verify the performance of the ESG Index compared to the market. The measurement of volatility and returns, as well as tests of hypotheses of cointegration and causality between the time series of returns on quotations of selected ESG Indices and their respective benchmarks, were used. Besides that, autoregressive vector and heteroscedastic conditional autoregressive volatility models were estimated. The data used are weekly quotations of the ESG equity indices and their respective market benchmark. The results revealed a difference in the risk and return behavior of assets traded in emerging and developed economy markets caused by ESG practices. The results indicate a difference in the risk and return behavior of assets traded in emerging and developed markets caused by ESG practices. It can be inferred that emerging markets have seen a risk reduction that makes up ESG indices concerning their benchmarks.