ESG Scores’ Impact on Portfolio Performance, An Evidence from Indonesia

Authors

  • John Iwan Kusno School of Business and Economics, Universitas Prasetiya Mulya, Jl. R. A. Kartini (TB Simatupang), Cilandak Barat, DKI Jakarta 12430
  • Fransisca Tharia Hartanto School of Business and Economics, Universitas Prasetiya Mulya, Jl. R. A. Kartini (TB Simatupang), Cilandak Barat, DKI Jakarta 12430
  • Teddy Trilaksono School of Business and Economics, Universitas Prasetiya Mulya, Jl. R. A. Kartini (TB Simatupang), Cilandak Barat, DKI Jakarta 12430

DOI:

https://doi.org/10.21632/irjbs.17.2.199-212

Keywords:

Refinitiv ESG Score, Indonesia stock market, Portfolio construction, Performance evaluation, Sharpe ratio

Abstract

This study is to determine the effect of using the Refinitiv ESG score in stock picking and its impact on portfolio performance using the ESG Score. Methodology for this research using a two-sample t-test of Net Asset Value (NAV) price-return portfolios and the Sharpe ratio as a proxy for risk adjustment return for portfolio evaluation. The results of this study indicate that the use of a Refinitiv rating may serve as a suitable metric for stock selection strategy because companies with higher ESG scores tend to exhibit superior performance. Since ESG ratings in Indonesia are still difficult to obtain, those with access to ESG ratings will have more advantages. Greater return performance is followed by an increased level of risk. Given the assumption of a well-diversified portfolio, it is hypothesized that the increased risk can be attributed to a larger variance coefficient. So that the Sharpe ratio must be used for portfolio evaluation to measure risk-adjusted returns.

Author Biographies

John Iwan Kusno, School of Business and Economics, Universitas Prasetiya Mulya, Jl. R. A. Kartini (TB Simatupang), Cilandak Barat, DKI Jakarta 12430

Faculty Member from Department of Finance, School of Business and Economics, Universitas Prasetiya Mulya

Fransisca Tharia Hartanto, School of Business and Economics, Universitas Prasetiya Mulya, Jl. R. A. Kartini (TB Simatupang), Cilandak Barat, DKI Jakarta 12430

Faculty Member from Department of Finance, School of Business and Economics, Universitas Prasetiya Mulya

Teddy Trilaksono, School of Business and Economics, Universitas Prasetiya Mulya, Jl. R. A. Kartini (TB Simatupang), Cilandak Barat, DKI Jakarta 12430

Faculty Member from Department of Business, School of Business and Economics, Universitas Prasetiya Mulya

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Submitted

09/02/2024

Accepted

10/25/2024

Published

10/30/2024

How to Cite

Kusno, J. I., Hartanto, F. T., & Trilaksono, T. (2024). ESG Scores’ Impact on Portfolio Performance, An Evidence from Indonesia. International Research Journal of Business Studies, 17(2), 199-212. https://doi.org/10.21632/irjbs.17.2.199-212

How to Cite

Kusno, J. I., Hartanto, F. T., & Trilaksono, T. (2024). ESG Scores’ Impact on Portfolio Performance, An Evidence from Indonesia. International Research Journal of Business Studies, 17(2), 199-212. https://doi.org/10.21632/irjbs.17.2.199-212