The Expediency of Accounting for ESG Factors when Constructing an Investment Portfolio

Student: Buslaeva Irina

Supervisor: Pavel Malyshev

Educational Programme: Economics (Bachelor)

Year of Graduation: 2020

Due to the growing popularity of socially responsible investment, this paper aims to answer the question about the expediency of accounting for ESG (Environmental, Social, Governance) factors during portfolio construction on the Russian market. Based on the previous research which revealed a positive relationship between corporate social and financial performance of companies in both developed and emerging markets, it was suggested that the Russian market would also appreciate the non-financial disclosure. To test the hypothesis 28 Russian companies rated by Refinitiv in terms of ESG we examined from 2015 to 2019. The results of Carhart's four-factor model (1997) application revealed the existence of the week positive correlation between ESG factors and stock returns which proved the expediency of accounting for ESG factors when constructing an investment portfolio.

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