Innovest Strategic Value Advisors

Impact of an Environmental Screen on Portfolio Performance: A Comparative Analysis of S&P 500 Stock Returns

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Courtesy of Innovest Strategic Value Advisors

Financial theory suggests that in applying an environmental screen, the portfolio manager limits the universe of potential investments, and in so doing limits the possible risk/return characteristics of a portfolio. The alternative theory is that selecting for environmentally friendly companies serves as an effective screen to identify companies with superior financial performance, because environmental initiatives lead to product and process improvements that manifest themselves in increased efficiency and a healthier bottom line.

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