20.500.12556/DKUM-96414 Long-term effect of Environmental, Social, and Governance (ESG) corporate practices on corporate stock performance In the context of the growing prominence of socially responsible investment, the debate over whether sustainable corporate practices translate into sustained shareholder value has intensified. As a key tool for aligning their investment portfolios with responsible/sustainable corporate practices, investors rely on listed companies’ Environmental, Social, and Governance (ESG) ratings. This study aims to investigate the long-term impact of ESG practices on the stock performance of listed companies. We perform a Q1 2000–Q1 2025 backtest to analyse the comparative performance of a Best-in-Class ESG portfolio, constructed by the top 30 listed companies with market capitalisations above USD 2 billion ranked by Morningstar Sustainalytics’ ESG Risk Ratings as of 31 March 2025 against the S&P 500 Total Return index. We found that ESG leaders exhibited superior risk-adjusted performance, outperforming the S&P 500 Total Return Index. The BiC portfolios achieved a substantially higher CAGR and Sharpe ratio, while maintaining maximum drawdowns that remained comparable to the benchmark S&P 500 Total Return index. We also found that ESG advantages were more pronounced in market downturns, with the Best-in-Class ESG portfolio showing better CAGR and Sortino ratios. The findings of this study demonstrate that responsible governance and management create benefits for all stakeholders, including investors, society and nature, in the broadest sense of these terms. Environmental Social and Governance (ESG) principles ESG ratings stock market corporate financial performance portfolio management sustainable investment socially responsible investment corporate governance sustainability true false true Angleški jezik Angleški jezik Znanstveno delo 2026-01-06 13:31:21 2026-01-06 13:31:21 2026-01-07 03:09:17 0000-00-00 00:00:00 2025 0 0 str. 1-22 issue 24, spec. iss., [art. no.] 11321 Vol. 17 2025 0000-00-00 Zaloznikova Objavljeno NiDoloceno 2025-11-12 2025-12-12 2025-12-17 005.3 263524355 10.3390/su172411321 2071-1050 https://www.mdpi.com/2071-1050/17/24/11321 1 9cdacb2b-eafb-11f0-a407-00155d580e02 https://dk.um.si/Dokument.php?lang=slv&id=201790 RAZ_Minev_Svetlin_2025.pdf RAZ_Minev_Svetlin_2025.pdf 1 44988042DB6119F4B933463C2CF9615C 2ecb60c48cbf0b7df8840ca2d2a2c26d1f9289ef63e56932c32a95ee6d7aa3c7 d67ec52c-eafb-11f0-a407-00155d580e02 https://dk.um.si/Dokument.php?lang=slv&id=201792 Ekonomsko-poslovna fakulteta 0 0 0