ESG rating changes and portfolio returns: A wavelet analysis across market caps
Carlos Esparcia and
Mariya Gubareva
Finance Research Letters, 2024, vol. 63, issue C
Abstract:
This study implements advanced wavelet analysis to affirm a strong positive connectedness between E, S, and G pillar ratings and equity portfolio returns, particularly at low frequencies or long-term investment horizons. However, for E-pillar strategies, a transient negative "equity greenium" phase in 2019–2020 indicates that elevated E-ratings coincide with reduced financial performance. Bidirectional relationships challenge conventional ESG score notions, with weaker global ESG return connections, mid-cap portfolio exceptions (2015–2017), and short-term impacts on large caps (2019–2021). Inter-pillar connections, especially post-2015 E and S dynamics, unveil evolving complexities. Hierarchical connectedness patterns among portfolios underscore unique dynamics, emphasizing the multifaceted ESG landscape.
Keywords: ESG assessment pillars; Connectedness; Rating changes; Portfolio construction (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003362
DOI: 10.1016/j.frl.2024.105306
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