ESG Integration and Long-Term Portfolio Performance: Evidence from International Markets

Abstract

In the macro context of the deep transformation of the global economy to a sustainable development model, environmental, social and corporate governance (ESG) factors are increasingly established in the core position of asset pricing and portfolio construction in the international capital market. This article explores the core mechanism of ESG integration on long-term portfolio performance and international market performance. The study shows that ESG integration is not a simple moral constraint, but significantly improves the long-term risk-adjusted returns of the portfolio by avoiding tail risks and optimizing the cost of capital of enterprises. However, due to the differences in market development stages, the excess returns of ESG investment show significant heterogeneity between developed and emerging markets, and face empirical challenges such as divergent rating standards and "greenwashing". Clarifying the above complex mapping mechanism provides a solid theoretical basis for institutional investors to optimize the cross-cycle asset allocation framework and regulatory authorities to improve the information disclosure system.