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The impact of ESG ratings on implied and historical volatility

Eric Burger, Fabian Grba and Thomas Heidorn

No 230, Frankfurt School - Working Paper Series from Frankfurt School of Finance and Management

Abstract: The economic and political developments of the past years show an increasing importance of a possible risk-reducing of the company due to good ESG performance. Our work contributes by examining the impact of relatively better ESG performance of companies on their implied and historical share volatility. Our regressions show a clear relationship between the volatilities and the ESG ratings of the market-leading agencies (Bloomberg, Refinitiv, Sustainalytics and MSCI) and our combined score. A better ESG performance measured by the company's ESG rating(s) has a risk-reducing effect in the form of lower stock volatility. However, our combined rating has the strongest impact.

Keywords: Environmental; Social and Governance (ESG); ESG Ratings; ESG Rating Filter; Equity Volatility; Historical Volatility; Implied Volatility; Company Risk Performance (search for similar items in EconPapers)
JEL-codes: G11 G24 G32 Q56 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-env, nep-fmk and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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