“Firms with high sustainable investing scores earn rising portfolio weights, leading to short-term capital gains for their stocks — realized returns rise temporarily. However, the long-term effect is that higher valuations reduce expected long-term returns.

[COMMENTARY]The phenomenon of high ESG performing stocks having relatively high prices and thus not performing as well as rising ESG performers has been observed before. This is why some investors — such as Engine No 1’s ETFs — believe that higher returns are possible by investing in ‘low’ ESG performing companies and motivating those companies further on the ESG path.
Green Stocks Have Lower Returns but Less Risk, by Larry Swedroe, January 31, 2022, Advisor Perspectives, USA.