In the time-series (ordinal ESG) or the cross-section (cardinal ESG)? We show analytically that, when proper adjustment to guarantee identical ESG ratings is implemented, the return spread of the factors produced by the two methods is merely noise. We provide a protocol to construct a...

This paper analyzes the asset pricing and portfolio implications of an important barrier to sustainable investing---uncertainty about the corporate ESG profile. In equilibrium, the market premium increases and demand for stocks declines under ESG uncertainty. In addition, the CAPM alpha and...