Environmental Portfolios—Evidence from Screening and Passive Portfolio Management

Environmental portfolios via screening or optimization with respect to ecological criteria are not clear-cut concepts. Often, they urge investors reduce the asset universe, which is accompanied by diversification losses. In this article, we show that a simple passive selection strategy based on environmental allows adjust their without compromising even reducing risk-adjusted financial performance. detail, does lead significant performance reduction. Moreover, propose an improves portfolios’ performance, and further its potential positive impact. Our results suggest combination of environmental-scoring-based allocation seems be viable option for environmentally responsible leveraging advantages both strategies. Furthermore, construct risk factor CMP (clean minus polluting) document loading when added Fama–French five-factor model, suggesting existence premium firm’s