Integrating ESG and Smart Beta Strategies in the Brazilian Equity Market

This study examines the integration of Environmental, Social, and Governance (ESG) criteria with smart beta strategies in the Brazilian equity market using the IBrX 100 index from June 2015 to December 2024. We compare ESG screening and ESG rebalancing mechanisms across portfolios based on fundamental and low-volatility factors. The results show that ESG rebalancing primarily reduces portfolio risk, while ESG screening improves risk-adjusted performance and generates economically meaningful excess returns, particularly in cash-flow-based strategies. Overall, the findings indicate that ESG-oriented smart beta portfolios can enhance resilience and efficiency in emerging markets without compromising investment discipline.