What are environmental, social, and governance scores measuring? The role of outcome and impact indicators in ESG scores

Santiago Guerrero and Juan Pablo Viteri

Finance Research Letters, 2025, vol. 72, issue C

Abstract: Environmental, social, and governance (ESG) ratings are fundamental tools; however, their underlying methodologies often involve complex aggregation processes. Although research on ESG has been expanding, the influence of specific indicators and categories on overall ESG scores remains insufficiently explored. This paper examines the contributions of social and environmental outcome and impact indicators to the ESG scores provided by the London Stock Exchange Group (LSEG). Our analysis reveals that among the 186 indicators comprising the LSEG ESG scores, outcome and impact indicators contribute only 18% to 37% of the total score. The remaining contribution comes from processes and policies indicators.

Keywords: ESG scores; Outcome indicators; Impact indicators; Machine learning (search for similar items in EconPapers)
JEL-codes: C55 G24 M14 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324015587

DOI: 10.1016/j.frl.2024.106529

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