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Deconstructing ESG Ratings Performance: Risk and Return for E, S And G by Time Horizon, Sector and Weighting
Mar 30, 2021
How are environmental, social and governance (ESG) ratings constructed? Which indicators are the most important in assessing ESG characteristics? Does the answer vary by sector? This foundational paper examines the impact on financial performance of two types of ESG indicators: the individual E, S and G pillars scores and the underlying ESG Key Issue scores. They found that these indicators related differently to companies’ financial performance and challenges the conventional wisdom that “G” is the dominant contributor to ESG ratings performance. 2021 Pageant Media. Republished with permission of the Journal of Portfolio Management, from “Deconstructing ESG Ratings Performance: Risk and Return for E, S, and G by Time Horizon, Sector, and Weighting.” Guido Giese, Zoltan Nágy and Linda-Eling Lee. Vol. 47, No. 3, 2021.
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Research authors
- Linda-Eling Lee, Managing Director, MSCI Research
- Zoltán Nagy, Executive Director, MSCI Research
- Guido Giese, Managing Director, MSCI Research