Sustainable investing in the oil industry - Is it possible?

Abstract

This thesis analyses if sustainability affects the returns on public oil companies listed in the USA. Tilting into the best-in-class companies of a brown industry is theoretically proven to improve investment returns and the ESG performance of a company. My hypothesis is based on the best-in-class theory that the most sustainable companies would have better performance than the least sustainable ones. If the hypothesis holds, tilting could be a potential sustainable investing strategy. I tested the hypothesis with USA based oil companies and analyzed their financial performance with time series regressions. The analysis demonstrated no significant difference between the companies, and I was not able to find evidence that sustainability affects the returns of the oil industry. These findings suggest that sustainably minded investor does not get added value from tilting.