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What are environmental, social, and governance scores measuring? The role of outcome and impact indicators in ESG scores

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  • Guerrero, Santiago
  • Viteri, Juan Pablo

Abstract

Environmental, social, and governance (ESG) ratings are fundamental tools; however, their underlying methodologies often involve complex aggregation processes. Although research on ESG has been expanding, the influence of specific indicators and categories on overall ESG scores remains insufficiently explored. This paper examines the contributions of social and environmental outcome and impact indicators to the ESG scores provided by the London Stock Exchange Group (LSEG). Our analysis reveals that among the 186 indicators comprising the LSEG ESG scores, outcome and impact indicators contribute only 18% to 37% of the total score. The remaining contribution comes from processes and policies indicators.

Suggested Citation

  • Guerrero, Santiago & Viteri, Juan Pablo, 2025. "What are environmental, social, and governance scores measuring? The role of outcome and impact indicators in ESG scores," Finance Research Letters, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324015587
    DOI: 10.1016/j.frl.2024.106529
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    More about this item

    Keywords

    ESG scores; Outcome indicators; Impact indicators; Machine learning;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis

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