ESG IN PORTFOLIO CONSTRUCTION: WHAT DOES THE SCIENTIFIC LITERATURE REVEAL?

ABSTRACT This paper presents a Systematic Literature Review (SLR) on the relationship between ESG (Environmental, Social, and Governance) criteria and portfolio diversification strategies. Following the PRISMA protocol and Williams et al. (2021) checklist, the review examines 87 peer-reviewed articles published between 2014 and 2023. Results show that ESG has a generally positive effect on portfolio performance and diversification, although the impact varies across sectors, regions, company sizes, and investor profiles. The study’s core contribution is the development of an integrative conceptual framework that classifies the literature into four analytical lenses: ESG as a risk factor, investor preference, investment style, and quality signal. The review enhances understanding of how ESG dimensions influence portfolio decisions and suggests avenues for future research.