TY - JOUR T1 - ESG: <em>Alpha or Duty?</em> JF - The Journal of Index Investing DO - 10.3905/jii.2019.1.066 SP - jii.2019.1.066 AU - Rajnish Kumar Y1 - 2019/02/08 UR - https://pm-research.com/content/early/2019/02/08/jii.2019.1.066.abstract N2 - The paper examines information content of Environment, Social and Governance (ESG) from factor exposure perspective. We use integration approach of ESG in portfolio construction by using four broader MSCI USA ESG indices. The analyses have been done using risk-return, CAPM, Fama-French three factors, Fama-French-Carhart four factors, Fama-French five factors and Fama-French-Carhart six factors asset pricing models since the inception of each of the four ESG indices. We find that most of the returns of these four indices are explained by CAPM market factor and different asset pricing factors are significantly associated with returns of these ESG indices. The analyses show that there is no information content in ESG overall score in constructing a portfolio instead asset managers should incorporate relevant parameters forming part of overall ESG score in their portfolio construction. The institutional investors should perform their duty of helping poorly ESG ranked companies in changing their structural framework and thereby improving overall ESG score and then gaining through ESG momentum. ER -