Mardi | 2020-02-18
Salle des thèses 16h-17h20

Olivier David ZERBIB

I show how sustainable investing affects asset returns through exclusionary screening and environmental, social, and governance (ESG) integration. I develop an asset pricing model with partial segmentation and disagreement. A taste premium clarifies the relationship between ESG and financial performance. Two exclusion premia, generalizing Merton’s (1987) premium on neglected stocks, drive the exclusion effect. By using green fund holdings to proxy sustainable investors’ tastes, I estimate the model applied to green investing and sin stock exclusion using U.S. data for 2000-2018. The annual taste effect ranges from -1.09% to +0.11% for the different industries and the average exclusion effect is 3%.