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ESG scores as screening tools for common risk and return measures - A study on Bloomberg ESG disclosure scores across sectors

Nordenlöw, Gustaf LU and Rogic, Valentino LU (2019) NEKH02 20191
Department of Economics
Abstract
Today, investors look for more than just the potential return a company can bring when making investment decisions. An increased demand to invest sustainably has created a demand for investors to screen companies via ESG scores. In this thesis, we therefore aim to examine if Bloomberg’s ESG disclosure scores can be used as screening tools and proxies for the most common risk and return measures, volatility and Sharpe Ratio. Specifically, we study 368 companies in Western Europe divided between 10 sectors. A regression analysis with pooled variables is then done to see if there is any significant overall correlation. The study finds there is significance in 8 out of 10 sectors regarding correlation between ESG scores and risk while only 3... (More)
Today, investors look for more than just the potential return a company can bring when making investment decisions. An increased demand to invest sustainably has created a demand for investors to screen companies via ESG scores. In this thesis, we therefore aim to examine if Bloomberg’s ESG disclosure scores can be used as screening tools and proxies for the most common risk and return measures, volatility and Sharpe Ratio. Specifically, we study 368 companies in Western Europe divided between 10 sectors. A regression analysis with pooled variables is then done to see if there is any significant overall correlation. The study finds there is significance in 8 out of 10 sectors regarding correlation between ESG scores and risk while only 3 out of 10 sectors have a significant correlation regarding ESG scores and return. These results suggest ESG scores can be used as a proxy for risk but not return. However, favourable market conditions could also be a factor explaining our results. (Less)
Please use this url to cite or link to this publication:
author
Nordenlöw, Gustaf LU and Rogic, Valentino LU
supervisor
organization
course
NEKH02 20191
year
type
M2 - Bachelor Degree
subject
keywords
ESG, disclosure, Sharpe ratio, volatility, risk, sustainability, sustainable investing
language
English
id
8981105
date added to LUP
2019-08-08 11:31:02
date last changed
2019-08-08 11:31:02
@misc{8981105,
  abstract     = {{Today, investors look for more than just the potential return a company can bring when making investment decisions. An increased demand to invest sustainably has created a demand for investors to screen companies via ESG scores. In this thesis, we therefore aim to examine if Bloomberg’s ESG disclosure scores can be used as screening tools and proxies for the most common risk and return measures, volatility and Sharpe Ratio. Specifically, we study 368 companies in Western Europe divided between 10 sectors. A regression analysis with pooled variables is then done to see if there is any significant overall correlation. The study finds there is significance in 8 out of 10 sectors regarding correlation between ESG scores and risk while only 3 out of 10 sectors have a significant correlation regarding ESG scores and return. These results suggest ESG scores can be used as a proxy for risk but not return. However, favourable market conditions could also be a factor explaining our results.}},
  author       = {{Nordenlöw, Gustaf and Rogic, Valentino}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{ESG scores as screening tools for common risk and return measures - A study on Bloomberg ESG disclosure scores across sectors}},
  year         = {{2019}},
}