Gustavo Bernal Torres
A Sustainable Capital Asset Pricing Model (S-CAPM)
Evidence from Environmental Integration and Sin Stock Exclusion.
This paper shows how sustainable investing—through the joint practice of exclusionary screening and environmental, social, and governance (ESG) integration—affects asset returns.
The author characterizes two exclusion premia generalizing Merton’s (1987) premium on neglected stocks and a taste premium that clarifies the relationship between ESG and financial performance. The author estimates and explains the dynamics of these premia.