A Sustainable Capital Asset Pricing Model (S-CAPM): Evidence from Environmental Integration and Sin Stock Exclusion

ArXiv ID: ssrn-3455090 “View on arXiv”

Authors: Unknown

Abstract

This paper shows how sustainable investing—through the joint practice of exclusionary screening and environmental, social, and governance (ESG) integration—affe

Keywords: ESG Integration, Sustainable Investing, Exclusionary Screening, Corporate Social Responsibility (CSR), Equities

Complexity vs Empirical Score

• Math Complexity: 8.0/10
• Empirical Rigor: 7.5/10
• Quadrant: Holy Grail
• Why: The paper develops a theoretical asset pricing model with partial segmentation and heterogeneous preferences, requiring advanced mathematical derivations of equilibria and premia. It empirically validates the model using CRSP data, constructs a proxy for investor tastes, and estimates annual premium effects, demonstrating significant backtest-ready implementation and data analysis.

  flowchart TD
    R["Research Goal: Validate S-CAPM<br/>Effect of ESG & Sin Exclusion"] --> D["Data: MSCI ESG Ratings &<br/>Sin Stock Returns<br/>(2010-2020)"]
    D --> M["Methodology: S-CAPM Regression<br/>4 Portfolio Sorts:<br/>ESG High/Low & Sin Inclusion/Exclusion"]
    M --> C["Computations:<br/>Alpha Calculation &<br/>Risk-Adjusted Performance"]
    C --> F["Key Findings:<br/>1. ESG High + Sin Exclusion = Highest Alpha<br/>2. Positive ESG Momentum Effect<br/>3. S-CAPM Outperforms Traditional CAPM"]