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Comparing ESG score weighting approaches and stock performance differentiation

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  • Muck, Matthias
  • Schmidl, Thomas

Abstract

This study examines how weighting methodologies in ESG ratings for sustainability categories align with their financial relevance. We analyse Refinitiv’s data-driven weights against equal weights and SASB’s expert-based weights. Our findings show all methods differentiate firms by returns, but equal and SASB weights lead to a stronger effect, particularly after the Paris Agreement. This suggests alternative weighting approaches might better capture the financial significance of ESG categories.

Suggested Citation

  • Muck, Matthias & Schmidl, Thomas, 2024. "Comparing ESG score weighting approaches and stock performance differentiation," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009541
    DOI: 10.1016/j.frl.2024.105924
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    More about this item

    Keywords

    ESG ratings; Category weightings;

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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