Summary

Environmental (E), social (S), and governance (G) scores have shown different relationships with financial characteristics of firms. Historically, governance has provided the strongest significance, social the weakest. A combination of E, S, and G scores that maximized historical financial significance did not lead to a signal with superior long-term stock-price effect. The weighting of E, S, and G issues in aggregating a composite score may better reflect the dynamically changing ESG landscape, aiming to capture unfolding, emerging risks.