The risk-return tradeoff: are sustainable investors compensated adequately?

Abstract We investigate the returns from investing according to corporate social responsibility (CSR) criteria using factor model estimations for a large sample of U.S. firms over period 2003–2017. To identify CSR intensity that allows investors optimize their portfolio given amount risk, we relate factor-adjusted variety risk measures. This consideration is important as equity risks have been shown significantly decrease with CSR. Surprisingly, our results indicate lowest CSR-rated portfolios are able outperform higher counterparts: Not only do they show but also deliver return-to-risk ratios. indicates in even more strongly than corresponding rising activity.