Challenges in Analyzing ESG Data and Their Potential Solutions

Shaheen Contractor

Chapter 8 in Sustainable Investing:Problems and Solutions, 2024, pp 223-252 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we examine the challenges in extracting and analyzing Environmental, Social and Governance (ESG) data and their potential solutions. In particular, we focus on material ESG data relevant to companies and industries vs. a “one-size-fits-all” approach, highlighting examples where ESG has had a financial impact. We discuss how ESG metrics impact company performance, highlighting among others how ESG facets might impact risk, returns along with fundamentals. Furthermore, using the holdings of some of the largest US ESG funds, we discuss what characteristics drive ESG fund inclusion and what might be missed. Lastly, we discuss how ESG might not be that far removed from having a positive societal impact and discuss strategies that can drive this.

Keywords: Sustainable Investing; Impact Investing; Corporate Social Responsibility; Materiality; Externalities; Sustainability; ESG; ESG Funds; ESG Factors; ESG Scores; SASB; SDG; DEI; Private Equity; General Partners; Active Ownership; Investment Stewardship; Machine Learning; Natural Language Processing; Large Language Models; Transition Economy; Climate Risk; Net-zero Investing; Divestment; Greenhouse Gas Emissions; Scope 3 Emissions; Modern Portfolio Theory; Venture Investments; Carbon Dioxide Removal; Carbon Credits; Fuel Production; Portfolio Management; Market Sentiment; Factor Investing; Portfolio Optimization; Post-investment Management; Digital Transformation; Fixed Income; Portfolio Performance Measures (search for similar items in EconPapers)
Date: 2024
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