This paper studies the impact of environmental, social, and governance (ESG) ratings on investors' preferences and … stock prices. We exploit a change in ESG rating methodology that non-linearly shifted ESG ratings for firms as a natural … experiment. We show that the 'pseudo'-changes in the ESG ratings induced by the change in methodology are unrelated to potential …

We exploit a modification to Sustainalytics' environmental, social, and governance (ESG) rating methodology, which is … subsequently adopted by Morningstar, to study whether ESG ratings are salient for stock pricing. We show that the inversion of the … ESG ratings. They buy (sell) stocks they misconceive as ESG upgraded (downgraded) even when the opposite is true. This …

We propose a theory in which each stock's environmental, social, and governance (ESG) score plays two roles: 1 … problem is characterized by an ESG-efficient frontier, showing the highest attainable Sharpe ratio for each ESG level. The … corresponding portfolios satisfy four-fund separation. Equilibrium asset prices are determined by an ESG-adjusted capital asset …

We analyze the ESG rating criteria used by prominent agencies and show that there is a lack of a commonality in the … definition of ESG (i) characteristics, (ii) attributes and (iii) standards in defining E, S and G components. We provide evidence … agreement across those providers is substantially low. Those alternative definitions of ESG also a↵ect sustainable investments …

exhibit better environmental, social, and governance (ESG) portfolio-level scores ("footprints") but this is not the case for … US-domiciled institutions. In fact, US investors that committed but only partially implement ESG strategies (e ….g., screening, integration, engagement) exhibit worse ESG footprints than uncommitted investors, consistent with some "greenwashing …

The idea behind the optimal ESG portfolio (OESGP) is to expand the mean variance theory by adding the portfolio ESG … value (PESGV) multiplied by the ESG strength parameter γ (which is investor’s choice) to the minimizing objective function … (Pederson et al., 2019; Schmidt, 2020). PESGV is assumed to be the sum of portfolio constituents’ weighted ESG ratings that are …

What do asset managers believe regarding the financial performance of Environmental, Social, and Governance (ESG … ESG performance. Managers with more “skin in the game” exhibit significantly lower ESG performance in funds they manage … than their peers. ESG performance is sensitive to changes in managerial ownership. Co-investing managers were less likely …