**4. Conclusions**

As evidenced by massive fund flows into ESG equity funds and other asset classes with ESG focus in the past decades, this chapter reviews several dimensions of how ESG investment strategies affect investment outcomes. Supporting evidence of ESG performance in equity markets has been documented worldwide, both among developed and developing economies. Although it is quite consistent in terms of the risk reduction benefit of ESG investing in equity portfolio, especially during extreme turbulent markets, there have been mixed findings on the effects of ESG investing on the investment returns. This, however, could be explained by the differences in the sample, period of the study, and empirical methodologies used in the studies. ESG factors have also shown to share the similar risk reduction benefit in the fixed income market. High ESG-rated bonds on average have smaller spreads, could serve as an effective hedging instrument relative to certain asset types, especially during a market downfall. In addition, companies' stock prices and liquidity tend to improve after ESG bond issuances. ESG factors have demonstrated to be an important determinant in investments in alternative markets as well. For example, REITs tend to have higher firm value, the higher the ESG rating scores. Moreover, highly ESG-rated REITs perform better than lower ESG-rated peers during extreme market fluctuations such as during the COVID-19 market shock. While most PE firms focus on the risk reduction property of ESG factors, they often see governance improvement opportunities in investee firms and create value through improved alignments among agents' interests.

With the ongoing trend and the increased focus on ESG investing principles, this chapter highlighted the implications and the importance of ESG investing in several market segments. It also provides directions for future research. First, future studies in ESG investing need to address data inconsistencies in more details. Second, benchmarks can play an important role in accessing relationship of ESG performance and portfolio's return and risk. Third, as different ESG data providers tend to use different imputation methods, it is important for these agencies to be transparent about the imputation methods that have been used. Future studies should use appropriate statistical approaches to investigate and address missing observation systematically. Lastly, as ESG focuses primarily on helping investors achieving long-term or sustainable corporate performance, future studies can help uncover the components of ESG that truly lead to long-term and sustainable corporate performance.
