AgPa #18: ESG Confusion (1/2)
ESG Rating Disagreement and Stock Returns (2021)
Rajna Gibson Brandon, Philipp Krueger, Peter Steffen Schmidt
Financial Analysts Journal 77(4), 104-127, URL/SSRN
This week’s AGNOSTIC Paper is about a quite controversial topic: Environmental, Social, and Governance a.k.a. ESG. ESG refers to the idea that investors should consider those dimensions in their decisions and thereby contribute to a more sustainable economy. But as this week’s paper shows, there is little agreement on what ESG actually is…
- ESG ratings disagree: the average correlation is just 0.45
- There is less ESG disagreement for larger, more profitable firms with credit ratings
- Investors demanded a risk premium for ESG uncertainty