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Cross-dispersion bias-adjusted ESG rankings

Author

Listed:
  • Philippe Dupuy

    (Grenoble Ecole de Management)

  • Jean-Charles Garibal

    (Grenoble Ecole de Management)

Abstract

We study the formation of ESG scores and rankings. In particular, we investigate the impact of aggregation rules when combining information on firms across categories, notably the E, S and G categories, into single ESG scores. Usual aggregation rules may bias scores toward the smost dispersed category. We suggest a correction for this dispersion bias. We apply this correction to scores provided by two of the main score providers: Refinitiv and Bloomberg. We also provide simulation evidences. We show that the cross-dispersion bias may have a significant impact on ESG scores formation and that our proposed adjustment tends to weather it.

Suggested Citation

  • Philippe Dupuy & Jean-Charles Garibal, 2022. "Cross-dispersion bias-adjusted ESG rankings," Journal of Asset Management, Palgrave Macmillan, vol. 23(7), pages 631-643, December.
    • Handle: RePEc:pal:assmgt:v:23:y:2022:i:7:d:10.1057_s41260-022-00293-x
    DOI: 10.1057/s41260-022-00293-x
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    References listed on IDEAS

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    More about this item

    Keywords

    ESG; Sustainability; Corporate social responsibility; Cross-dispersion bias; Scoring; Adjusted scores;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G00 - Financial Economics - - General - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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