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<p>The paper empirically studies the role of sustainable impact investments in strengthening portfolio resilience, and risk adjusted performance in the UK equity market from 2017 to 2022. By applying an unique dataset of impact companies affiliated with the Social Stock Exchange UK (UKSSE), the analysis applies Markowitz’s modern portfolio theory, Sharpe ratio analysis, paired t-test and CAPM regression models. Although the UKSSE ceased operations in 2019, the study continues to track these firms as they remain publicly traded on the LSE/AIM, maintaining core social and environmental business models. The framework is performed under a rolling 24&#xa0;month out-of-sample (OOS) back testing with a maintained target of 10% annualised volatility. The findings from this study show as follow: (1) Adding impact stocks in portfolios demonstrate superior risk adjusted efficiency, achieve higher annualised returns and Sharpe ratios than the FTSE All-Share benchmark. (2) The impact portfolio sustained a positive excess return (alpha) and a lower market beta, which suggests the impact portfolio provides strong diversification effects and partial independence from systemic market movements. The study enhances transparency in impact investment evaluation using public data and conventional financial metrics. Based on the empirical findings, assets managers and institutional investors can integrate impact oriented assets into mainstream portfolios, seeking to align financial performance with sustainability goals.</p>

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Do impact investments enhance portfolio resilience? Evidence from UK sustainable firms

  • 期刊论文

  • 出版模式：

    开放获取

  • 发表日期：

    2025年12月15日

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  • Yang Song,
  • Lin Tang,
  • Shuhui Yang

摘要

The paper empirically studies the role of sustainable impact investments in strengthening portfolio resilience, and risk adjusted performance in the UK equity market from 2017 to 2022. By applying an unique dataset of impact companies affiliated with the Social Stock Exchange UK (UKSSE), the analysis applies Markowitz’s modern portfolio theory, Sharpe ratio analysis, paired t-test and CAPM regression models. Although the UKSSE ceased operations in 2019, the study continues to track these firms as they remain publicly traded on the LSE/AIM, maintaining core social and environmental business models. The framework is performed under a rolling 24 month out-of-sample (OOS) back testing with a maintained target of 10% annualised volatility. The findings from this study show as follow: (1) Adding impact stocks in portfolios demonstrate superior risk adjusted efficiency, achieve higher annualised returns and Sharpe ratios than the FTSE All-Share benchmark. (2) The impact portfolio sustained a positive excess return (alpha) and a lower market beta, which suggests the impact portfolio provides strong diversification effects and partial independence from systemic market movements. The study enhances transparency in impact investment evaluation using public data and conventional financial metrics. Based on the empirical findings, assets managers and institutional investors can integrate impact oriented assets into mainstream portfolios, seeking to align financial performance with sustainability goals.