Comparing ESG score weighting approaches and stock performance differentiation

Matthias Muck and Thomas Schmidl

Finance Research Letters, 2024, vol. 67, issue PB

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.

Keywords: ESG ratings; Category weightings (search for similar items in EconPapers)
JEL-codes: G24 M14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009541

DOI: 10.1016/j.frl.2024.105924

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