Module 1

Recent developments in ESG integration

The European
Federation of
Financial Analyst
Societies
Sophienstraße 44,
60487 Frankfurt am Main
[email protected]
www.effas.com
Learning objectives

This module gives an introduction into the current state of sustainability integration within the financial sector.

The learning objectives are:

§ Understanding what drives the demand for ESG.
§ Understanding what challenges are associated with ESG integration and what kind of barriers exist.
§ Have an overview over empirical studies on ESG investment and the implication for sustainable investment.

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Agenda

1.1. Market drivers

1.2. Barriers to ESG
1.3. Empirical evidence about ESG and financial performance

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1.1. Market drivers

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1.1. Market drivers
Drivers

Investor Initiatives
Investor Demand
Global Challenges
Public Perception
Regulatory ……..
Framework
Data Availability

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 1.1. Market drivers
Not the only global challenge…

Long-term global atmospheric, in parts per Global Mean Surface Air Temperature Anomalies
Daily CO₂ Emissions from fossil fuels in metric tons
million (ppm), (past 800,000 years) over Ocean and Land Areas (C, 1880-2020)

1.5

0.5

-0.5

-1

1880
1886
1892
1898
1904
1910
1916
1922
1928
1934
1940
1946
1952
1958
1964
1970
1976
1982
1988
1994
2000
2006
2012
2018
Land Surface Oceans

Source: Le Quéré et al. (2020); NOAA (2020); GISS (2021).

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1.1. Market drivers
…global challenges as defined by the WEF

Top Global Risks by Likelihood Top Global Risks by Impact

Source: WEF Global Risk Report (2021).

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1.1. Market drivers
…global challenges as defined by the UN SDG’s

Source: UN Sustainable Developments Goals (2015).

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1.1. Market drivers
UN SDGs

§ While ESG is a broader concept that refers to the following categories: environmental, social and governance, the SDGs are more
concrete goals developed by the UN, which could be assigned to these three broad categories.
§ UN SDGs are universally known and can therefore act as common reference points. Under these 17 goals, 169 targets are specified.
§ Although the conception of the goals is mainly attributed to economies, companies are increasingly referring to these goals and outline
their contribution towards the achievement of these goals.
In light of global risks and challenges, corporations need to consider and incorporate the double SDG-Reporting circle for companies
materiality of these factors.
§ Regarding increased disclosure regulations by the EU for financial corporations, i. e. SFDR, (Module 2)
sustainability risks and impact assessments must be disclosed.
§ Current developments at an EU-level highlight the increased focus on the financial sector and its
integration of sustainability aspects.
§ Example: The website SDG Investments offers information and a possibility to compare
sustainable funds, although only German funds are covered.

Source: GRI & UN Global Compact (2018).

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1.1. Market drivers
Bassen et al. (2021): Analytical Paper on an SDI-Aligned Index SDI decision tree

§ Research question: How could a scalable market index be created using the
Sustainable Development Investing (SDI) definition?
§ Problem: How can we measure companies’ contribution to the SDGs for
operationalizing the SDI definition?
§ Procedure:
§ Conceptional criteria for selection of index constituents
§ SDI rating for weighting and comparison with benchmark
Source: GISD (2020)

Company contribution to the SDGs Condition Measurement (points) Max SDI

SDG contribution through products and services The company does not obstruct any of the SDGs. No ISS objective Score is negative (4) 4
The company makes a significant contribution to one of the SDGs. At least one ISS objective Score is greater than 5 (3) 3
The company contributes to one or multiple SDGs. One ISS objective Score is positive (1) 3
Two ISS objective Scores are positive (2)
Three or more ISS objective Scores are positive (3)
SDG contribution through sustainable business practices The company has superior ESG ratings. Refinitiv ESG pillar score (E, S, or G) is between 50 and 75 (1 for each pillar) 6
Refinitiv ESG pillar score (E, S, or G) is greater than 75 (2 for each pillar)
The company is not involved in significant ESG controversies Sustainalytics Controversy Rating is 0 (3) 3
Sustainalytics Controversy Rating is 1 (2)
Sustainalytics Controversy Rating is 2 (1)
The company is compliant with the UN Global Compact Principles. Sustainalytics Global Compact Compliance (1) 1

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Bassen et al. (2021): Analytical Paper on an SDI-Aligned Index

Weighting and performance

Equal weighted SDI-index (EW) versus benchmark Value weighted SDI-index (VW) versus benchmark Tracking SDI-index (Tracking) versus benchmark Risk/Return/SDG SDI-index versus benchmark
(B = MSCI ACWI) (B = MSCI ACWI) (B = MSCI ACWI) (B = MSCI ACWI)

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1.1. Market drivers
Investor initiatives – Motives

Main motives for investors joining initiatives in the sustainability area

§ Active commitment
§ Raising public awareness
§ Competitive advantage
§ Gathering of Information and knowledge
§ Prevent regulation

Selected examples of current, existing initiatives

§ UN Principles for Responsible Investment
§ Carbon Disclosure Project
§ UN Global Compact
§ International Corporate Governance Network (ICGN)
§ UNEP FI
§ Climate Bonds Initiative

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1.1. Market drivers
Investor initiatives – United Nations Principles for Responsible Investment (UNPRI)

§ A group of large global, institutional investors launched the UNPRI under the
patronage of the United Nations
§ A voluntary investor initiative with a clear focus on the promotion of
sustainable and responsible investing
§ Requires:
§ Commitment to the six principles
§ Required mandatory annual reporting by signatories

Source: UNPRI (w. d.).

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1.1. Market drivers
Investor initiatives – UNPRI in numbers

The PRI has grown consistently since it began in 2006.

Source: UNPRI (2022).

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1.1. Market drivers
Data availability – information flow
Raw data

Edited, normalized data

Additional information on companies, esp. controversies

NGO/Media
Sustainability report as additional information / for verification

Raw data, edited data and ratings

Sustainability reports

Investment Investment
Intermediaries Investors
Broker/ Analysts recommendation management
Asset managers
Company (e.g. rating agencies, data (e.g. Pension funds)
providers, rankings or
funds)

Source: DVFA, PwC, University of Hamburg (2018).

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1.1. Market drivers
Carbon data & ratings – the CDP

§ The Carbon Disclosure Project (CDP) requests information on the risks Geographic spread of disclosing companies in CDP’s sample
and opportunities of climate from the world’s largest companies on
behalf of more than 515 institutional investor signatories with a
combined investment of more than US$ 106 trillion in assets (May
2020).
§ Also 147+ of the world’s largest companies and organizations with
over US$4 trillion in purchasing power request information through
CDP on climate change, deforestation, and water security.
§ CDP provides information to its institutional investor signatories, as
well as distributing it throughout the global marketplace to increase
transparency around climate-related investment risk.
§ CDP information is utilized in investment research, products, indices
and ratings from i. e. Bloomberg, STOXX, Trucost, FTSE/Russell, MSCI
ESG, and ISS ESG. Climetrics uses CDP data for climate impact rating Each dot represents one company, the size of the dot represents the size of the
for investment funds. company’s emissions (CDP (2017) Picking up the pace: Tracking corporate action on
climate change)

Source: CDP (2017), (2020).

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1.1. Market drivers
Carbon data & ratings: Growth of disclosing firms to the CDP

§ The 9,600+ companies responding to CDP

represent more than 50% of global market cap.
§ Additionally, 810+ cities disclose environmental
information and 130+ states and regions measure
their environmental impacts.

Source: CDP (2022).

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1.1. Market drivers
Data availability – information flow

Example: Rating agencies

1. Data generation
Information from NGOs • Public data
• Interviews
• Controversies (NGOs) Ratings and rating reports
Interviews 2. Normalization of data
(incl. phone calls, emails Rating agencies
and questionnaires) 3. Assessment of data Normalized raw data

Company 4. Rating
• Adjustment: annual
Sustainability reports
Website/internet • Sector specific
Annual reports environmental indicators
partly based on standards,
such as GRI

Source: DVFA, PwC, University of Hamburg (2018).

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1.1. Market drivers
Data availability – ESG research and data sources (examples)

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Data availability – Integrated ESG data by financial data providers

Source: Bloomberg (2021).

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Data availability – Integrated ESG data by financial data providers

Source: Refinitiv (2021), Bloomberg (2021).

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1.1. Market drivers
Data availability – ESG Ratings Environment Social Governance
(56) (58) (34)

§ All of these research and rating providers evaluate a set of indicators that Operations (26) Employees (15) Business ethics (16)

reflect the management quality and the performance of a company with Suppliers
respect to ESG topics Supply chains (12)
(10)
Governance (14)

§ These indicators are weighted according to materiality (financial and/or Products (18)
Clients
Public policy (4)

non-financial) considerations in order to come up with an overall rating

(14)

Society, Community
§ Usually, the set of indicators is divided into a sub-set of indicators common and Philanthropy
(19)

to all industries and another sub-set that is specific to an industry

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1.1. Market drivers
Data availability – Example 1: Sustainalytics

§ The Sustainalytics research is focused on ESG risks and takes into

account the industry classification in compiling the score:
1. The first step is the identification of material ESG issues,
that are likely to have a significant impact on the value of
the company.
2. In a second step the company’s exposure is divided in
manageable and unmanageable risk.
3. The third step identifies, which manageable risks are
addressed, i.e. managed.
4. Finally, the resulting score combines the exposure to
unmanageable risks and manageable risks, that are
unaddressed.

§ Coverage of over 12,000 companies, that are placed in 42

industries and 138 subindustries (or peer groups).
Source: Sustainalytics (2020).

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1.1. Market drivers
Data availability – Example 2: RepRisk

§ RepRisk as a specialised provider of reputational risk data

§ Extensive coverage
§ Systematic evaluation of reputational risks in the ESG area
§ Current monitoring of news flow
§ Establish potential implications for price movements

§ Example report: Stora Enso OYJ

Source: RepRisk (2018), Bloomberg (2020).

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1.1. Market drivers
Data availability – Example 3: Sustainalytics
§ Sustainalytics assesses governance-related risks and opportunities by “determining the extent
to which a company’s governance practices detract from or add to the company’s ability to
execute on its business strategy”
§ Corporate Governance indicators look for risk based on boardroom practices and behaviour
§ Sustainalytics evaluates 6 Key Governance Issues
§ Board & Management Quality & Integrity
§ Board Structure
§ Remuneration
§ Ownership & Shareholder Rights
§ Financial Reporting
§ Stakeholder Governance

§ Indicators (Remuneration as an example):

§ Structure of incentive programs
§ Quality of disclosure
§ Shareholder ability to influence pay programs and voting results
§ Quantitative measures of pay magnitude and alignment with performance
§ Pay controversies

Source: Sustainalytics (w. d).

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1.1. Market drivers
Data availability – Morningstar, YourSRI, and MSCI fund ratings

Source: Morningstar, YourSRI, MSCI (w. d.).

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1.1. Market drivers
Data availability – Cooperation

§ ESG data have become increasingly important, as besides regulator interventions, investors become more aware and demanding in
terms of sustainability.
§ Here, several data providers have established and additionally have formed alliances in terms of use of ESG data:
§ Various (partial) acquisitions (MSCI à GMI, Innovest à KLD; S&P à Robeco SAM Research, Truecost; Morningstarà Sustainalytics
à Solaron; ISS à oekom, Southpole; Moody’s à Vigeo/Eiris; …)
§ Refinitiv (Thomson Reuters) uses i.e. SASB; Bloomberg includes companies’ DJSI percentiles and Sustainalytics’, Arabesque,
IdealRatings, ISS, CDP, BGEI, Equileap, ATMI
§ Some rating agencies use SDGs as a framework

§ The EU regulations, especially the Taxonomy, provide a joint reference point and will enhance comparability.
§ For financial companies, sustainability data is important not only to provide services to more sustainable-oriented investors, but also as
EU regulations are incorporating all market participants in transforming the European economy.

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1.2. Barriers to ESG

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1.2. Barriers to ESG

§ Speed of ESG integration is low (PRI 2017, EU Commission 2018), despite comprehensive and high-level commitment of investors and
policy makers.
§ Challenges to integrate ESG factors endanger reaching societal goals à What are the obstacles? How can they be addressed?
§ Identified obstacles depend on survey / interview approach and context:
§ Eccles et al. (2017): measuring ESG performance, concerns about underperformance, lack of (company) ESG data, costs associated
with ESG integration, personal beliefs of the senior leadership or investment committee, regulations / interpretation of fiduciary
duty, …
§ Amel-Zadeh & Serafeim (2018): Lack of comparability across firms, Lack of standards in reporting, cost of gathering and analysing
ESG information, disclosed ESG information too general, too inconsistent, too infrequent, reliability of data, materiality of data, no
client focus
§ EU High Level Expert Group (2018): Transparency (improving disclosure), standardization (taxonomy, benchmarks), labelling
(classification systems, green labels), clarifying investor duties, supervision
§ quantitative vs. qualitative analyses, pre-determined answers vs. open answers, various different samples sizes

Source: EU High Level Expert Group (2018); Amel-Zadeh, Serafeim (2018); Eccles et al. (2017).

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1.2. Barriers to ESG

§ Approach: Meta synthesis of primary papers on ESG integration impediments, supported by textual analysis
§ Data: more than 100 literature reviews and investor surveys (combining feedback of > 10,600 investment professionals)
§ In scope: practitioner and academic literature
§ Outcome: research identifies >160 different topics, which are subsumed in groups and aggregates along a four-pillar framework of
market-, firm, regulatory-, and individual-based impediments

Source: Friede (2019).

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1.2. Barriers to ESG

Communication
Lack of

Client reporting

ase
Imp

Targe

ess C
leme

resource
Cul

ts

Busin
ntati
ture
In c

s
on
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els and
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Or

Communic… Findings
ga setu

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s
ni p

a
za

od
lu
l
tio

na

Va
io rk
n

ut
al

M
Le

tit ewo

titu tor
an

ns
Market-based impediments are mentioned relative to most frequent,
ag s
In ram
ad

ing
§

tio
Ins ves
em
F ark
ers

en
t hm

In
nc o ry
followed by regulation-based, individual-based and firm-based
hip

Per B e the
cep lio
tio rtfo
ns Po
impediments
firm ed

Bel
bas

iefs
cific
-

-spe
Bias
es N on
Beha
vi
Obst oral § Most prominent mentioned groups of impediments are:
acl es t-
marke perceived lack of a business case (mentioned in 74.1% of reports)
ent
Measurem
Short-term
ism ta §
d Company da
base ESG data (72.3%)
individua Disclosure
§
l-based § absence of clear standards and definitions (66.1%)
Actor
ge &
Quality
§ various behavioral biases (66.1%) like short-termism (42.9%), biases (30.4%)
w l ed
K n o ct o r
A
Ma
Dyn rket
Produ
ct sup
p ly and beliefs (20.5%)
am i
or

cs § lack of investor education/ knowledge (45.5%)

d

Dem
regulat
y-base

and
In t § Missing/ unclear regulation (39.3%) of which the most prominent is fiduciary
St

ge er m
led
ew

ed i
Kn
ow ar i
duty (34.8%)
ar

es
s

ds
ard

Challenges to integrate in valuation and models (26.8%)

hi
Eth
Regulation &

§
nd

n Ac
io
i cs
S ta

us tiv
External

nf ism
Challenges to consider external effects (26.8%)
In
al

Costs

Co §
on

ve
sto
ati

Pr
/n

rs

Missing management and leadership support (25.9%)

ox
r
cto

tru

§
yv
ns

ctu
Se

Eth

oti
itio

re

Organizational setup (21.4%)

ics

ng

§
fin

Regu
alities

Fiduciary duty
De

…
latio

Note: The sunburst diagram weights §

Extern

the relative share of pillars and

aggregates based on the frequency of
the groups (excluding sub-groups) Source: Friede (2019).

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1.3. Empirical evidence about ESG and financial performance

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 1.3. Empirical evidence about ESG and financial performance
Perception on ESG and performance changing
60%

40%
higher

20%

0%

-20%
lower

-40%

-60%

-80%
ZEW (2007) Feri Euro BankInvest Maastricht Erste Bank Riedl & Smeets Wins & Gallup / Wells Eccles & RBC Global AM RBC Global AM DVFA (2019) RI / UBS (2019) Bafin (2019)
Rating (2009) (2009) University (2011) (2015) Zwergel (2016) Fargo (2017) Kastrapeli (2017) (2018)
(2011) (2017)
Investor samples:
ZEW (2007): German institutional investors; Feri Euro Rating (2009): German institutional investors; Bankinvest (2009): institutional investors from Germany, Austria, Switzerland; Maastricht University (2011): German retail clients; Erste Bank (2011): Austrian retail clients; Riedl
& Smeets (2015): Mutual fund investor in the Netherlands; Wins and Zwergel (2016): German retail investors; Gallup / Wells Fargo (2017): US private investors; Eccles & Kastrapeli (2017): global institutional investors; RBC Global AM (2017/2018): global institutional investors;
DVFA (2019): German institutional investors, RI / UBS (2019): International institutional investors, Bafin 2019: German private investors

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1.3. Empirical evidence about ESG and financial performance
Practical evidence

§ MSCI statistics show that ESG-integration lead to positive financial returns.

§ Moreover, companies with high ESG ratings are less vulnerable to systematic
market risks and have lower subsequent earnings volatility.

MSCI World ESG Leaders vs. MSCI World (active) MSCI World SRI vs. MSCI World (active)
4% 25%
3%
20%
2%
15%
1%
0% 10%
-1% 5%
-2%
0%
-3%
7 9 1 3 5 7 9
7 8 9 0 1 2 3 4 5 6 7 8 9 00 00 01 01 01 01 01
00 00 00 01 01 01 01 01 01 01 01 01 01 /2 /2 /2 /2 /2 /2 /2
9/2 9/2 9/2 9/2 9/2 9/2 9/2 9/2 9/2 9/2 9/2 9/2 9/2 09 09 09 09 09 09 09
0 0 0 0 0 0 0 0 0 0 0 0 0
Source: MSCI, Bloomberg Q2 (2020).

Sources: MSCI (2019); BofA Merrill Lynch US Equity & Quant Strategy (2018).

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1.3. Empirical evidence about ESG and financial performance
Practical evidence (cont.)

§ Concept of sin stocks and exclusion strategies lead to selective

inclusion of assets. The table shows the percentage of respective
MSCI World style index removed when applying typical screens.

Source: Schroders (2017).

§ The reduced diversification gives rise to questions on the implications for performance.
Conclusions of academic research
§ “…the sin stock premium and the price of sin aversion could be artifacts of an ivory tower research design and are not necessarily
applicable to the real world.” (Adamsson & Hoepner, 2015)
§ After controlling for exposures of the new Fama and French 2015 quality factors, profitability and investment, “we find no evidence of
the existence of a premium that pertains specifically to sin stocks, such as a reward for bearing the reputation risk involved with these
stocks.” (Blitz & Fabozzi, 2017)
§ “…the exclusion of the companies generally does not harm funds’ performance. We interpret these findings as indicative that, with
exclusionary screening, … , asset owners can meet the ethical objectives of their beneficiaries without compromising financial returns.
(Hoepner & Schopohl, 2018)

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1.3. Empirical evidence about ESG and financial performance
Practical evidence (cont.)

§ A Morningstar study considering all European-domicile funds across different asset classes shows that 55% (FI), 60% (EQ) and 63%
(MA) of ESG funds are positioned in the first and second quartile in their respective peer groups.
§ Furthermore, there is proportionally higher share of ESG assets under management in Europe, with room for growth globally.
§ Looking at prices of ESG assets, there is a consistent pattern that ESG stocks are more expensive in Europe. In the US the increasing IT
overweight among typical good ESG stocks start to distort average valuations. Although here style/sector adjusted measures do not
show the stretched picture.
Share of ESG Funds in the total mutual fund universe
Quartile Ranking of European-domiciled ESG Funds in their respective 12.0% 1.50
Morningstar Category (5 years, YE 2019)
10.0% 10.1% 1.20
1.18
40% 37% 8.0%
34% 0.90
30% 30% 0.84
30% 26% 27% 26% 6.0%
22% 0.60
21% 4.0%
20% 18% 19% 0.41 4.2%
2.0% 3.0% 0.30
11%
10%
0.0% 0.00
Europe US World
0% Share of ESG AuM in Regional Universe (lhs)
1 2 3 4 ESG Mutual Funds AuM (tn USD, rhs) Source: JP Morgan (2020);
Equity Fixed Income Multi Asset Source: Morningstar (2020). Source: Morningstar Direct (2019). BofA Merrill Lynch (2020).

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 1.3. Empirical evidence about ESG and financial performance
Does the longer-term empirical evidence support the outlined anecdotal evidence?

Number of empirical ESG-CFP studies over time From primary studies to Vote-Count Studies / Meta-Analyses and
Second-order Meta-Analysis

3,000

Second-order Meta-Analysis
Cumulative number of studies

2,500

2,000

Vote-Count Vote-Count Meta Meta

… …
1,500 Study 1 Study 35 Analysis 1 Analysis 25

1,000
+/0/- r/p/σ
500

0 P1 ... Pn
… P2 P3 ... Pn P1 P3 ... Pn
… P4 P5 ... Pn

1970 1980 1990 2000 2010

Source: Busch, Friede, Lewis & Bassen (2018).

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1.3. Empirical evidence about ESG and financial performance
Main findings of the 2015 ESG Meta Study on ESG and performance

§ 90% of the more than 2000 studies displayed a positive or neutral 62.6%
ESG-Corporate Financial Performance (CFP) relationship; less than
10%, a negative one
§ Disproportionate positive relations of ESG factors in all asset classes 47.9%

and specifically fixed income and real estate

§ From a regional perspective, ESG is especially meaningful in North
America and Emerging Markets
§ In terms of the individual E, S and G sub-categories, there did not
appear to be a dominating single factor 0.146 0.150

§ Highlights the difference of portfolio vs. non-portfolio studies that 6.9% 8.0%
may bias the perception of investors
§ Correlation between ESG and CFP in various papers remained on
share of positive findings share of negative findings weighted correlation lev el r
average relatively constant since the mid-1990s in studies

vote-count studies meta-analyses

Source: Friede et al. (2015).

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1.3. Empirical evidence about ESG and financial performance
Main findings of the 2018 ESG Meta Study on ESG and performance (cont.)
0.40
§ ESG-CFP relation is significantly positive, robust and bilateral - across #! / "!!"

various research designs, the E and S sub-groups, and sensitivity checks 0.35

§ Particularly strong ESG-CFP for perceptual and operational CFP, 0.30

highlighting that ESG, affects operational metrics such as energy
efficiency and employee turnover & motivation, and therefore financial 0.25

performance 0.20

§ Corporate reputation (as the most overarching ESG outcome measure), 0.15
followed by philanthropy, which turns out to be highly correlated to CFP
0.10
§ ESG disclosure displays the weakest correlation to CFP à limited
standardization of ESG disclosure practices may encourage companies to 0.05

provide beneficial rather than unbiased ESG information (investors see

through it) 0.00
CSP <--> CSP <--> CSP <--> CSP <--> CSP <--> CSP <--> CSP <-->
Perceptua l Opera tional Acc ounting Growt h CFP Ma rket CFP Risk CFP Mutual Funds
§ ESG-CFP relation most likely not distorted by publication biases, CFP CFP CFP CFP

methodologically weaker studies or analyses published in social issues- Second-order bare bones Second-order final summary effect,
oriented journals summary effect, corrected for corrected for first-order sampling error and
first-order sampling error artifacts, and second-order sampling error

Source: Busch & Friede (2018).

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1.3. Empirical evidence about ESG and financial performance

§ Decade-long academic research finds, at least, a non-negative ESG-CFP relation, while many studies suggest that good ESG
performance can lead to better CFP through various transmission channels
§ 90% of all studies find a non-negative ESG-CFP relation, of which more than 50% of overall studies even exhibit a significant positive
relation; strong relations exist especially in2 North America and Emerging Markets, as well as for Bonds and Green Real Estate; results
of portfolio-based ESG-CFP studies are typically somewhat distorted through various overlapping effects; limiting learning effects of
capital markets so far, as correlation patterns have been stable since the mid 1990s
§ Particularly strong ESG-CFP for operational CFP, highlighting that ESG affects operational metrics (e. g. energy efficiency or employee
engagement) and via this financial performance; Corporate reputation (as the most overarching ESG outcome measure) turns out to be
highly correlated to CFP
§ ESG investing as a way to fulfil fiduciary duties, while better aligning investors’ interests with the broader objectives of society:
Embracing a win-win mindset among all stakeholders (instead of the win-lose logic of shareholder theory) can significantly reorient the
opportunity set of investors and increase planetary welfare overall

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1.3. Empirical evidence about ESG and financial performance
Main findings of the 2021 ESG Meta Study on ESG and financial performance

§ Meta analysis of 1,000+ studies published between 2015-2020.

§ Positive relationship between ESG and financial performance for 58%

of corporate studies and for 33% of investor studies.

§ Comparison to other meta-analyses (n = 15) published since 2015

§ Corporate meta-analyses (n=13): positive correlation between
ESG and corporate financial performance.
§ Investor meta-analyses (n=2): ESG investing returns
indistinguishable from conventional investing returns.

Source: Whelan Atz, Van Holt & Clark (2021).

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1.3. Empirical evidence about ESG and financial performance
Further information on the ESG and CFP meta studies

Friede, Busch & Bassen (2015)

Academic Paper: ESG and financial performance: aggregated evidence from more than 2000 empirical studies: https://www.tandfonline.com/doi/full/10.1080/20430795.2015.1118917

Friede, Lewis, Busch & Bassen (2015)

DWS Global Research Institute Whitepaper: ESG and corporate financial performance: Mapping the global landscape: https://download.dws.com/download?elib-
assetguid=2c2023f453ef4284be4430003b0fbeee

Busch & Friede (2018)

Academic Paper: The Robustness of the Corporate Social and Financial Performance Relation: A Second-Order Meta-Analysis: https://onlinelibrary.wiley.com/doi/full/10.1002/csr.1480

Busch, Friede, Lewis & Bassen (2018)

DWS Global Research Institute Whitepaper: Digging deeper into the ESG – Corporate Financial Performance Relationship: https://download.dws.com/download?elib-
assetguid=714aed4c2e83471787d1ca0f1b559006&wt_eid=2151963337700789577&wt_t=1538929014707

Whelan, Atz, Van Holt & Clark (2021)

Study: ESG and Financial Performance: Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015-2020:
https://www.stern.nyu.edu/sites/default/files/assets/documents/NYU-RAM_ESG-Paper_2021%20Rev_0.pdf

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Takeaways

§ Several drivers explain the growth of the market.

§ Demand for sustainability is increasing, e. g. in terms of investment opportunities.
§ The whole value chain is influenced by increasing sustainability concerns.
§ Clear empirical evidence for the business, social, and environmental rationale of ESG investing.

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