Integrating ESG Criteria into Factor-Based Investment Strategies: A Quantitative Approach to Sustainable Portfolio Construction

Inglese

This thesis explores a robust, quantitative framework for integrating environmental, social and governance (ESG) criteria into fundamental factor-based equity investment strategies. In the context of recent geopolitical tensions and economic uncertainties, investors’ priorities have progressively shifted away from sustainability, moving instead towards growth-oriented and defensive investment approaches. In response to these challenges, this research empirically demonstrates that ESG considerations can be effectively combined with traditional factor-based strategies without compromising—and often improving—risk-adjusted portfolio returns. Beyond its analytical contributions, the research aims to actively promote the integration of ESG within the investment process, offering a data-driven approach that aligns with the evolving expectations set forth by the European Union regarding sustainable finance and responsible investing. Employing rigorous quantitative methodologies and widely recognized financial metrics, the analysis systematically examines ESG’s interaction with fundamental investment factors, including Value, Growth, Quality, and Momentum. Furthermore, through extensive robustness tests under realistic and volatile market scenarios, the study establishes ESG criteria not only as a strategic complement to traditional investment styles but also as a reliable indicator of historically high-performing stocks. By bridging the gap between quantitative finance and sustainable investing, this work contributes meaningfully to both academic research and practical portfolio management. It provides a replicable and flexible framework, positioning ESG criteria as a valuable strategic tool that refines asset selection processes, improves financial performance, and aligns investments with evolving sustainability objectives in a complex and dynamic financial landscape.