IDEAS home Printed from https://ideas.repec.org/a/pal/assmgt/v26y2025i1d10.1057_s41260-024-00382-z.html
   My bibliography  Save this article

ESG as risk factor

Author

Listed:
  • Juris Dobrick

    (University of Kassel)

  • Christian Klein

    (University of Kassel)

  • Bernhard Zwergel

    (University of Kassel)

Abstract

There are numerous risk factors in asset pricing models that have been identified over the years. In this paper, we address the question of whether factors constructed using ESG (Environmental, Social, Governance) scores could potentially meet the necessary requirements for risk factors in multifactor models. While numerous studies indicate that the ESG performance of firms could be financially material, the integration of ESG factors has so far not been fully evaluated. We pay particular attention to the problem of divergent scores across different rating providers and investigate whether the regression results of 4- and 5-factor models converge. The evaluation is carried out with Fama–French and Carhart models, extended by an additional factor representing ESG, respectively. We find that there are ESG factors across all investigated rating providers that capture common-variation in stock returns over time, indicating that ESG should be considered in common asset pricing models.

Suggested Citation

  • Juris Dobrick & Christian Klein & Bernhard Zwergel, 2025. "ESG as risk factor," Journal of Asset Management, Palgrave Macmillan, vol. 26(1), pages 44-70, February.
    • Handle: RePEc:pal:assmgt:v:26:y:2025:i:1:d:10.1057_s41260-024-00382-z
    DOI: 10.1057/s41260-024-00382-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41260-024-00382-z
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/s41260-024-00382-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:assmgt:v:26:y:2025:i:1:d:10.1057_s41260-024-00382-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.