Here's the problem with your approach:
- When the evidence suggests that ESG underperforms, even ever so slightly and even with a small sample, you imply that the research is conclusive.
- When the evidence suggests that ESG outperforms, you attribute the excess performance to "other factors".
So your conclusion remains the same... regardless of the data.
Suspect.
And then there's this statement:
"Unless there is absolute certainty that ESG strategies will not underperform plain beta benchmarks, they should be avoided."
I think most unbiased researchers would have probably concluded the opposite: If ESG strategies can be reasonably expected to perform, on a risk-adjusted basis, as well as their standard benchmarks, then there is no reasonable basis for investors to avoid them.
Perhaps coincidental.
And finally:
In other exchanges we've had, you stated that even if the data sample you used in your Dec-2019 research (Factor Research) was too small, that your conclusions were still valid because they are supported by "common sense", since companies that score well on ESG factors tend to take a stakeholder-centric, as opposed to a shareholder-centric approach to value maximization.
This simplistic, zero-sum reasoning makes a terrible assumption: That resources directed towards ESG improvements do not generate value to shareholders.
Yet independent research suggests exactly the opposite: That relatively small investments in ESG improvements generate disproportionately large benefits in the form of reduced (reputational, operational, legal and regulatory) risks, reduced cost of capital, and improved cash flow stability and sustainability.
There are also indications that companies that exhibit good ESG performance are also better managed and less susceptible to fraud, making them superior investments.
One would have expected at least some of these well-established arguments to appear in any reasonably balanced review of the pros and cons of ESG investing. But strangely, none of them appear in your research.
I call that a pattern.