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ESG risk exposure: a tale of two tails

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  • Runfeng Yang
  • Massimiliano Caporin
  • Juan-Angel Jiménez-Martin

Abstract

This paper studies the ESG impact to the downside risk of companies in the US market by introducing a novel measure, the ESG risk contribution (ΔCoESGRisk). ΔCoESGRisk is a measurement based on the co-movement between the ESG risk factor and the downside risk. When there is a sudden increase in the ESG risk factor, the downside risk of high-ESG companies is reduced. However, under extreme conditions, the downside risk of high-ESG companies could also be increased, due to the increased company volatility. The ESG impact is positively correlated with the ESG performance and size, and it varies among sectors.

Suggested Citation

  • Runfeng Yang & Massimiliano Caporin & Juan-Angel Jiménez-Martin, 2024. "ESG risk exposure: a tale of two tails," Quantitative Finance, Taylor & Francis Journals, vol. 24(6), pages 827-849, June.
    • Handle: RePEc:taf:quantf:v:24:y:2024:i:6:p:827-849
    DOI: 10.1080/14697688.2024.2349016
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