ESG-score effect in risk assessment of direct and portfolio investment: evidence from CEE markets
Abstract
The inclusion of ESG factors (Environmental, Social, Governance) in the assessment of investment attractiveness is a dynamic trend in the current period. The integrated indicator of these factors is the ESG score. In the paper, the authors examined the interdependencies between the three indicators: ESG scores, expected returns, and risks. The survey was conducted for 21 companies from Central and Eastern Europe. The inverse relationship between ESG score and risk is shown, as well as the practical absence of a relationship with expected returns. ESG score effect in risk assessment of direct and portfolio investment was identified and analyzed.
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References
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Hill, J. (2020). Environmental, Social, and Governance (ESG) investing: A balanced analysis of the theory and practice of a sustainable portfolio. Academic Press.
Salerno, D. (2021). ESG Criteria in Alternative Investments. In The Evolution of Sustainable Investments and Finance (pp. 59-99). Palgrave Macmillan, Cham.
Gao, S., Meng, F., Gu, Z., Liu, Z., & Farrukh, M. (2021). Mapping and clustering analysis on environmental, social and governance field a bibliometric analysis using Scopus. Sustainability, 13(13), 7304.
Introduction to ESG. Posted by Mark S. Bergman, Ariel J. Deckelbaum, and Brad S. Karp, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Saturday, August 1, 2020 Introduction to ESG (harvard.edu) .
Boffo, R., & Patalano, R. (2020). ESG investing: Practices, progress and challenges. Éditions OCDE, Paris. www.oecd.org/finance/ESG-Investing-Practices-Progress-and-Challenges.pdf.
ESG – It’s about time. (2022). https://www.esgthereport.com/.
Giese, G., Lee, L. E., Melas, D., Nagy, Z., & Nishikawa, L. (2019). Foundations of ESG investing: How ESG affects equity valuation, risk, and performance. The Journal of Portfolio Management, 45(5), 69-83.
Giese, G., Nagy, Z., & Lee, L. E. (2021). Deconstructing ESG ratings performance: Risk and return for E, S, and G by time horizon, sector, and weighting. The Journal of Portfolio Management, 47(3), 94-111.
Nehrey, M. V., & Taranenko, A. A. (2021). Socially conscious investing: analysis of the impact of COVID-19 on the example of ETFs. Bulletin of Kharkiv National University named after V.N. Karazin series "Economic", (101), 6-16. DOI: https://doi.org/10.26565/2311-2379-2021-101-01
Nehrey, M. V., & Reminna, P. V. (2021). Impact of the COVID-19 pandemic on the stock market: ESG ETF case. Bulletin of Kharkiv National University named after VN Karazin. Series: International relations. Economy. Local studies. Tourism, (14), 79-89. DOI: https://doi.org/10.26565/2310-9513-2021-14-08
Zehir, E., & Aybars, A. (2020). Is there any effect of ESG scores on portfolio performance? Evidence from Europe and Turkey. Journal of Capital Markets Studies. Vol. 4 No. 2, pp. 129-143. https://doi.org/10.1108/JCMS-09-2020-0034
The Expanding Green Horizon: EU and UK ESG Regulatory Considerations and Developments for 2022. (2022). https://www.natlawreview.com/article/expanding-green-horizon-eu-and-uk-esg-regulatory-considerations-and-developments.
Investing.com. URL: https://www.investing.com/.
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