JSTC - Are Highly Rated ESG Companies Quality Stocks?

• The existence of a quality premium in stocks that has been persistent over time, pervasive around the globe and robust to various definitions has been well documented.
• One of the supposed benefits of ESG investing is that the screens used lead to investing in higher quality companies, allowing investors to access both themes.
• The perception that a company with a high ESG score is a quality company (more specifically, a profitable company) is not necessarily correct.
• There is limited evidence of factor return correlation of ESG scores and profitability/quality measures.
• If you are going to make ESG investing a core of your investment philosophy, thorough due diligence is required before committing assets.

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