ESG equity indices and financial performance: a systematic literature review

Abstract

The growing importance of environmental, social and governance (ESG) factors in investment decisions has resulted in a burgeoning literature on socially responsible and ESG-based equity indices. However, the evidence is mixed. This is due to the differences on the geographical coverage, index construction, the evaluation of the ESG criteria, the benchmarks, performance measures, market conditions and empirical methodologies. The study provides a detailed literature review and bibliometric analysis of the literature on ESG equity indices and their performance in financial markets. The assessment is conducted according to a systematic framework based on Tranfield, Denyer and Smart (2003) and the reporting is conducted according to PRISMA guidelines. An initial Scopus extraction provided 93 records for the 2009-2024 years. 43 studies from 2011 to 2024 were chosen for bibliometric and thematic analysis after relevance screening. Keyword co-occurrence was analyzed using VOSviewer with full counting, a minimum occurrence criterion of 2, and a standardized thesaurus. In the final network, a total of twenty keywords were retained. The resulting map reveals three interconnected thematic clusters: sustainable finance and financial performance; ESG, responsible investment and performance indicators; and governance, stakeholder engagement and stock market dynamics. The qualitative synthesis complements the bibliometric results by identifying consistent research themes on the performance of comparative ESG and traditional indices, risk-adjusted returns, resilience to crises, ESG disclosure, investor sentiment, governance, and propensities for responsible investing. The results suggest that the literature is interrelated and heterogeneous and that empirical context and measurement choices have a considerable impact on reported performance outcomes. The paper ends by discussing gaps in the literature and proposing a research agenda for future studies on the performance and the characteristics of ESG equity indices.