ESG Scores And Beyond (Part 1)

Kevin Ratsimiveh, Patrick Hubert, Valéry Lucas-Leclin & Emeric Nicolas

Research Organisation
FTSE Russell

Report Date
July 1, 2020

Document summary

Following years of research and debates, there is still only an emerging consensus as to the benefits of ESG analysis, and 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 its material effect on financial performance, with some success as seen in recent studies. However, before examining materiality, it is important to ask what information ESG scores try to capture in the first place? In this study, the authors seek to explain what new information ESG scores bring, especially for issuers, unpack how much ESG scores say about the sustainability efforts and performances of those issuers, and explore which areas of those efforts are driven by external factors that are not specific to the issuer.

The aim of these questions is not to disregard current ESG scoring and rating methodologies, but to statistically explore the role they have in broadening investors’ choice and understanding.