Equity · China · stocks · Yearly · China Free

Negative ESG Premium in Chinese Stock Market

Academic paper

AuthorsYinan Ni; Yanfei Sun

Institute

Lewis University
CAToronto Metropolitan University
?Ryerson University

Paper linkhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=4222515

Strategy in a nutshell

Go long low-ESG Chinese stocks and short high-ESG ones, rebalanced annually within industries, to capture ESG risk premium effects.

Economic rationale

Low-ESG firms face higher regulatory risks, creating an ESG risk premium. This drives excess returns unexplained by standard factors, especially after China’s carbon neutrality commitments.

Backtest performance

Annualised return8.99%

Volatility13.35%

Sharpe ratio0.67