Portfolio Management of ESG Stocks on The Stock Exchange of Thailand

Abstract

In recent years, investment strategies have increasingly emphasized the integration of Environmental, Social, and Governance (ESG) criteria. This study investigates the performance of investment portfolios constructed using ESG scores from ESG rating agencies, including Refinitiv and S&P Global. Employing Modern Portfolio Theory, specifically Portfolio Optimization techniques, we compare the returns of ESG-focused portfolios against other portfolios that either allocate investments equally across stocks or exhibit a bias towards stocks with higher ESG scores, as well as traditional benchmarks such as market indices. Results indicate that portfolios optimized based on ESG criteria consistently outperform other portfolio strategies and traditional benchmarks over various time horizons. For instance, over a 3-month period, portfolios optimized with Refinitiv's ESG scores achieved returns of 16.16%, 1.98%, and 8.82% for maximum return, minimum variance, and maximum risk-adjusted return portfolios, respectively, compared with the SET index (-10.69%) and the SETESG index (-12.59%).