Following years of research and debates on ESG analysis, there is still only an emerging consensus as to its benefit, and also no internationally ratified formal agreement that would stipulate what indicators should be required information for performance assessment and wider impacts evaluation.
Many studies have tried to capture this material effect on financial performance, with some success as seen in recent meta studies. However, before examining materiality, it is important to ask what type of information ESG scores try to capture in the first place? In this study, we seek to explain what new information they bring, especially for issuers, explore how much ESG scores say about the sustainability efforts and performances of those issuers, and examine which parts of those efforts are driven by external factors that are not specific to the issuer.
The purpose of these questions is not to disregard current ESG scoring and rating methodologies, but to statistically explore the role played by such factors to widen investors’ choice with some additional lenses when looking at ESG scores.