Joe Fung

Interdisciplinary seminars
finance seminar

Joe Fung

Hong Kong Metropolitan University
The Impact of ESG Rating on Hedging Downside Risks: Evidence from a Weight-Tilted Hang Seng Index
Tuesday, October 10 2023| 10:30am to 12:00pm

Eric Girardin: eric.girardin[at]
Gaël Leboeuf: gael.leboeuf[at]
Christelle Lecourt: christelle.lecourt[at]


The study examines the return performance and resilience to market volatility of the recently introduced Environment, Social/Sustainable, and Governance (ESG) weight-tilted Hang Seng Index (HSIESG) compared to its parent, the Hang Seng Index (HSI). The ESG-infused index has a higher mean return and lower return volatility than the parent index, although the differences are statistically and economically insignificant, a result consistent with the high correlation between the two index returns. Most important, the ESG weighted-tilted index is more resilient to volatility spikes than the parent index and therefore has lower downside risks. The overall results show that stocks with high ESG ratings are less susceptible to trading pressures triggered by volatility-induced turnovers. The paper contributes to the literature by providing significant incremental information on the emerging market for ESG-related equity products in Hong Kong.