ESG risk rating disagreement: implications on portfolio performance

Diana-Mihaela Sandu
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Diana-Mihaela Sandu: Bucharest University of Economic Studies, Romania

Theoretical and Applied Economics, 2024, vol. XXXI, issue 1(638), Spring, 161-168

Abstract: This paper examines the ESG risk rating disagreement across two-well established rating providers and its implication on portfolio performance. By deriving a proxy for rating disagreement using the average standard deviation of pairwise percentile ranking across Refinitiv and Sustainalytics, this study examined the risk-adjusted performance of high and low disagreement portfolios. For each portfolio, four risk-adjusted measures (Sharpe ratio, Treynor ratio, Modigliani- Squared and Jensen’s alpha) were calculated. In general, the study found that the best performer was the low-disagreement portfolio, but the results were not favourable for any portfolio.

Keywords: ESG disagreement; portfolio performance; risk-adjusted measures; industry; Europe. (search for similar items in EconPapers)
Date: 2024
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