ESG Integration in Investment Portfolios: A Comparative Study Between Developed and Emerging Markets
Article Sidebar
-
ESG integration, Developed markets, Emerging markets
Abstract
The growing prominence of Environmental, Social, and Governance (ESG) principles has reshaped investment decision-making across global financial markets. While ESG integration is well established in developed economies, its adoption in emerging markets remains uneven due to institutional, regulatory, and data transparency disparities. This study aims to compare the performance, risk characteristics, and strategic integration of ESG factors within investment portfolios across developed and emerging markets. A mixed-method approach was applied, combining quantitative analysis of ESG-indexed equity portfolios from 2015 to 2023 with qualitative evaluation of policy frameworks and investor behavior. The findings reveal that portfolios in developed markets consistently demonstrate superior risk-adjusted returns, attributed to stronger ESG disclosure standards and regulatory enforcement. Conversely, emerging markets exhibit higher return volatility and weaker ESG score correlations with financial performance, primarily due to inconsistent reporting and limited corporate accountability. The study concludes that while ESG integration enhances portfolio resilience and long-term sustainability, its impact is significantly conditioned by market maturity, governance quality, and institutional capacity. These results highlight the necessity for harmonized ESG frameworks and capacity-building initiatives to bridge the performance gap between developed and emerging economies.
Full text article
References
Alodat, A. Y., & Hao, Y. (2025). Environmental, social and governance (ESG) disclosure and firm performance: Moderating role of board gender diversity and sustainability committee. Sustainable Development, 33(1), 636–651. Scopus. https://doi.org/10.1002/sd.3126
Antoncic, M. (2022). Opinion piece Is ESG investing contributing to transitioning to a sustainable economy or to the greatest misallocations of capital and a missed opportunity? Journal of Risk Management in Financial Institutions, 15(1), 6–12. Scopus.
Bahuguna, D., Tiwari, R., Prakash, C., & Dhyani, B. (2024). AI, Financial Technology and Sustainable Investment in Esg Funds in India: A Bibliometric Exploration. 9–13. Scopus. https://doi.org/10.1109/ICETEMS64039.2024.10965074
Banelien?, R., & Strazdas, R. (2025). A Holistic Approach to Sustainability: Sustainable Development Goals (SDGs) and Corporate Sustainability. Contemporary Economics, 19(2), 186–207. Scopus. https://doi.org/10.5709/ce.1897-9254.561
Bhatia, R., Kadyan, S., Bhasin, N. K., Singh, S., & Bathla, S. (2025). Redefining investment paradigms: ESG integration and sustainable finance in new era of investing (pp. 31–46). CRC Press; Scopus. https://doi.org/10.1201/9781003480853-4
Busch, T., Bernard-Rau, B., & Brosche, H. (2025). Assessing company sustainability impact: Status quo and way ahead. Journal of Industrial Ecology, 29(4), 1426–1442. Scopus. https://doi.org/10.1111/jiec.70065
Chaiyarit, Y. (2024). COMPARATIVE ANALYSIS OF CRYPTOCURRENCY PORTFOLIO STRATEGIES INTEGRATING ESG CRITERIA ACROSS MARKET CONDITIONS AND TIME PERIODS. Revista de Gestao Social e Ambiental, 18(9). Scopus. https://doi.org/10.24857/rgsa.v18n9-112
Chen, A., Wang, S., Mehta, A. M., Asif, M., Xu, S., & Shahzad, M. F. (2025). FinTech adoption for ESG integration through robo advisors, personalization, and perceived trust. Scientific Reports, 15(1). Scopus. https://doi.org/10.1038/s41598-025-17046-6
Chen, L., Chen, Y., Kumar, A., & Leung, W. S. (2024). Firm-level ESG information and active fund management. Journal of Financial Intermediation, 60. Scopus. https://doi.org/10.1016/j.jfi.2024.101122
Cheong, C. W. H., Ibrahim, T. O., Akanbi, S. B., & Quin, L. L. M. (2024). Integrating Sustainability in Portfolio Construction: Models and Approaches (pp. 34–49). Taylor and Francis; Scopus. https://doi.org/10.4324/9781032686844-3
Chong, T., & Loh, L. (2023). Innovating ESG Integration as Sustainable Strategy: ESG Transparency and Firm Valuation in the Palm Oil Sector. Sustainability (Switzerland), 15(22). Scopus. https://doi.org/10.3390/su152215943
Dadabada, P. K. (2025). Analyzing the Impact of ESG Integration and FinTech Innovations on Green Finance: A Comparative Case Studies Approach. Journal of the Knowledge Economy, 16(2), 7959–7978. Scopus. https://doi.org/10.1007/s13132-024-02197-0
de Amaral, S., & Parrondo, L. (2025). Sustainability and genetic algorithms: An approach to asset portfolio optimization. Revista Brasileira de Gestao de Negocios, 27(2). Scopus. https://doi.org/10.7819/rbgn.v27i02.4295
de Rossi, G., Hoch, E., Ito, R., Lischetti, M., & Steliaros, M. (2024). ESG Integration in Practice: Liquidity, Market Impact, and Crowding. Journal of Investing, 33(1), 27–50. Scopus. https://doi.org/10.3905/joi.2023.1.289
Delle Foglie, A., & Keshminder, J. S. (2024). Challenges and opportunities of SRI sukuk toward financial system sustainability: A bibliometric and systematic literature review. International Journal of Emerging Markets, 19(10), 3202–3225. Scopus. https://doi.org/10.1108/IJOEM-04-2022-0601
Drago, C., Arnone, M., & Leogrande, A. (2025). A Machine Learning and Panel Data Analysis of N2O Emissions in an ESG Framework. Sustainability (Switzerland), 17(10). Scopus. https://doi.org/10.3390/su17104433
Ijzereef, T., VAN BEUKERING, P., & Botzen, W. (2023). A sustainable Catch-22: An assessment of sustainability in the Dutch pension sector. Cleaner Production Letters, 4. Scopus. https://doi.org/10.1016/j.clpl.2023.100030
Kashif, U., & Meo, M. S. (2024). Case Studies in Green Bond Portfolio Management: Best Practices and Lessons Learned (pp. 50–68). Taylor and Francis; Scopus. https://doi.org/10.4324/9781032686844-4
Khalil, M. A., Sinliamthong, P., & Khalil, R. (2025). From Paper to Pixels for a World of Purpose: A Systematic Review of Sustainable Finance, Blockchain, and Digital Assets. In World Sustainability Series: Vol. Part F85 (pp. 61–78). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-3-031-80969-9_5
Lee, W. H., Han, M.-Y., & Kim, S. (2023). ESG, Style Investing, and Integration. Asian Review of Financial Research, 36(3), 105–145. Scopus. https://doi.org/10.37197/ARFR.2023.36.3.4
Marohn, M., & Auer, B. R. (2024). A note on Steuer and Utz’s (2023) multi-objective optimization approach for generating sustainability-efficient fronts. European Journal of Operational Research, 316(2), 792–797. Scopus. https://doi.org/10.1016/j.ejor.2024.03.023
Nandhana, M., Saravanakumaran, B., & Visalakshmi, S. (2024). Sustainable and ethical investment with the technological innovation and emerging markets (pp. 329–360). IGI Global; Scopus. https://doi.org/10.4018/979-8-3693-8583-8.ch013
Patil, S. R., Nadiger, S. N., & Nimbagal, S. (2024). A study on ethical implications of using technology in ESG investing and ensuring unbiased decision making. Multidisciplinary Science Journal, 6(8). Scopus. https://doi.org/10.31893/multiscience.2024153
Peng, J., Huang, L., & Xu, J. (2024). Role of sustainability ethics in amplifying investments in common green properties and infrastructure in China. Economic Change and Restructuring, 57(3). Scopus. https://doi.org/10.1007/s10644-024-09674-1
Pokou, F., Sadefo Kamdem, J., & Benhmad, F. (2024). Empirical Performance of an ESG Assets Portfolio from US Market. Computational Economics, 64(3), 1569–1638. Scopus. https://doi.org/10.1007/s10614-023-10491-3
Rani, R., Vasishta, P., Singla, A., & Tanwar, N. (2025). Mapping ESG and CSR literature: A bibliometric study of research trends and emerging themes. International Journal of Law and Management. Scopus. https://doi.org/10.1108/IJLMA-09-2024-0301
Sharma, P., Kumar, M., Kumar, S., Olasiuk, H., Satapathy, D. P., & Ganushchak, T. (2025). Impact of ESG Disclosure on Price Discovery Process in the Indian Energy Sector. International Journal of Energy Economics and Policy, 15(3), 383–389. Scopus. https://doi.org/10.32479/ijeep.18807
Singhal, N., Goyal, S., Khan, M., Singhal, T., & Afjal, M. (2025). Environmental, Social, and Governance (ESG) Investing: Pioneering Change for a Sustainable and Resilient Tomorrow (pp. 495–527). wiley; Scopus. https://doi.org/10.1002/9781394311682.ch20
Sorathiya, A., Saval, P., & Sorathiya, M. (2024). Data-Driven Sustainable Investment Strategies: Integrating ESG, Financial Data Science, and Time Series Analysis for Alpha Generation. International Journal of Financial Studies, 12(2). Scopus. https://doi.org/10.3390/ijfs12020036
Steuer, R. E., & Utz, S. (2023). Non-contour efficient fronts for identifying most preferred portfolios in sustainability investing. European Journal of Operational Research, 306(2), 742–753. Scopus. https://doi.org/10.1016/j.ejor.2022.08.007
Sundharesalingam, P., Somasundaram, R., Sushmitha, S. S. S., Rithanya, R., & Archana, M. (2025). AI Enhanced FinTech Strategies for Driving ESG Investments in Sustainable Finance: Vol. 1247 LNNS (A. Bajaj, A. Abraham, K. R. Madhavi, & O. Castillo, Eds.; pp. 221–228). Springer Science and Business Media Deutschland GmbH; Scopus. https://doi.org/10.1007/978-3-031-81086-2_24
Vali, J., Yadav, P., & Thota, U. (2024). AI for Climate Action: Enhancing Sustainable Development Through ESG Analytics (N. Nagpal, M. Srivastava, S. Tiwari, S. Tiwari, & F. Ortiz-Rodriguez, Eds.; Vol. 3940, pp. 115–124). CEUR-WS; Scopus. https://www.scopus.com/inward/record.uri?eid=2-s2.0-105000824330&partnerID=40&md5=21e1630d9f97452c35f95e266cf46fa8
Zatonatska, T., Soboliev, O., Zatonatskiy, D., Dluhopolska, T., Rutkowski, M., & Rak, N. (2024). A Comprehensive Analysis of the Best Practices in Applying Environmental, Social, and Governance Criteria within the Energy Sector. Energies, 17(12). Scopus. https://doi.org/10.3390/en17122950
Zerbib, O. D. (2022). A Sustainable Capital Asset Pricing Model (S-CAPM): Evidence from Environmental Integration and Sin Stock Exclusion. Review of Finance, 26(6), 1345–1388. Scopus. https://doi.org/10.1093/rof/rfac045
