Business Review


Over the past decade, Environmental, Social and Governance Investment or ESG Investment has become a mainstream investment approach in the investment community around the world, especially in the US and Europe. There is increasing evidence from academic and practitioner research around the world that better ESG performance by companies leads to reduction in risks, improvement in financial performance, higher stock market valuations and hence, enhanced returns for investors investing in stocks of such companies. Hence, incorporating ESG factors can lead to better informed and improved investment decisions. This has led to development of ESG indices and fonds, to enable investors to identify high ESG performing companiesfor investment purposes. Absence of convincing research on the performance of ESG investment has been one of the major factors responsible for the slow adoption of this valuable investment approach in developing economies like India. This study aims at empirically investigating the performance of ESG investment in an emerging economy - India. For the purpose, it analyses the risk-return performance of ESG India Index as compared to the conventional benchmark index, using the Capital Asset Pricing Model and the Brown-Forsythe Levene's Test. The findings distinctively reveal that even in the short time since inception, ESG India Index outperforms the conventional index and hence, ESG investing enhances investment returns, without any significant difference in risk. Thus, it provides valuable guidance to investors that they can invest in highly rated ESG stocks without paying a penalty in terms of investment returns. This paper makes valuable contribution to empirical literature on ESG investment in developing economies, specifically India. It has important implications for the regulatory agencies, governments and other international organizational initiatives which are trying to popularize ESG investment, particularly in emerging economies.


Investment decisions, Risk-return performance, Volatility, Analysis



Journal of Economic Literature Subject Codes

G11, G17, G39

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Published Online

June 02, 2021



Publication Stage



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