ESG Ratings: Relevant information or misleading clue? Evidence from the S&P Global 1200

Authors

GYÖNYÖROVÁ Lucie STACHOŇ Martin STAŠEK Daniel

Year of publication 2021
Type Article in Periodical
Magazine / Source Journal of Sustainable Finance & Investment
MU Faculty or unit

Faculty of Economics and Administration

Citation
Web https://www.tandfonline.com/doi/full/10.1080/20430795.2021.1922062
Doi http://dx.doi.org/10.1080/20430795.2021.1922062
Keywords ESG;responsible investment;SRI;sustainable finance
Attached files
Description Environmental, social, and corporate governance (ESG) scores are frequently involved in investment-related decision-making, e.g. for red-flagging or to manage risks. The increasing interest in ESG data raises the question about their validity from various sources. Therefore, we explore the consistency and convergent validity of the well recognized ESG data providers. Exploratory factor analysis of S&P Global 1200 index demonstrates considerable uncertainty across extracted latent factors. Further factor analyses show that the consistency and convergent validity across ESG data significantly depend on the industry type and the country of domicile. These findings are supported by confirmatory factor analyses. Thus, the stakeholders are encouraged to incorporate the company sector and domicile aspects into their decisions. Otherwise, naive use of primary ESG scores may provide a misleading clue.
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