Deconstructing ESG Ratings Performance: Risk and Return for E, S, and G by Time Horizon, Sector, and Weighting

Guido Giese, Zoltán Nagy, Linda-Eling Lee

2021 | Practitioner | ESG Ratings, Risk & Performance

Aggregating environmental, social, and governance pillars into a total ESG rating added value in terms of performance and risk. Governance indicators showed the greatest significance in the short term because they have tended to materialize as event risks that immediately affected stock prices. However, some E and S indicators have developed slowly but have had long-lasting financial effects (erosion risks).