Abstract
This study empirically examines the risk and return performance of the portfolios built with consideration of the firm's ESG scores. Socially and non-socially responsible portfolios were constructed based on the universe of stocks from 27 developing and emerging countries in Asian, African, Latin American, East European, and Middle Eastern regions covering five years from 2016 to 2020. Three-stage procedure, which included social performance evaluation, asset screening, and portfolio optimisation, was performed. Asset weights during portfolio optimisation were determined using two approaches: equally weighted and mean-variance optimisation. As a result, our initial assumption of the superior return performance of the socially responsible investing (SRI) portfolio was not supported. Furthermore, the direction of the difference was contrary to the hypothesised one, observing lower SRI returns compared to other benchmarks, though the result lacks statistical significance. We found lower SRI portfolio risk than the market, which proved to be statistically significant.