Ciciretti, Rocco
[Verfasser:in]
;
Dalò, Ambrogio
[Sonstige Person, Familie und Körperschaft];
Dam, Lammertjan
[Sonstige Person, Familie und Körperschaft]
The Contributions of Betas versus Characteristics to the ESG Premium
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 21, 2019 erstellt
Beschreibung:
Firms that score low on environmental, social, and governance (ESG) indicators exhibit higher expected returns. This negative ESG premium might be driven by higher risk associated with low ESG scores, or it could signal investors' preferences for firms with high ESG scores. The first driver implies an underlying, systematic ESG risk factor, such that ESG risk factor betas explain differences in expected returns. The second driver implies that firm-specific ESG characteristics explain the ESG premium. To identify the separate contributions of ESG betas and ESG characteristics for explaining variation in expected returns, this study uses two global data sets from 2004-2018 and reveals that ESG characteristics mainly explain variation in expected returns. A one standard deviation decrease in ESG scores is associated with an increase of 13 basis points in monthly expected returns. This study also