August 24, 2022
Sustainability factors can severely impact the financial performance of companies, and investors should account for ESG risks in their portfolio construction process. We analyze the relationship between ESG controversy events detected in RavenPack Edge, and share prices of listed equities.
In our previous research paper, we introduced the
RavenPack ESG Controversy Scoring Framework
for corporate entities. In this paper, we analyze the relationship between ESG Controversy events and the share price of listed equities.
We find that :
The controversy momentum is a relevant measure of “new” information
surrounding companies and their involvement in controversial events.
While the volume-based measure suffers from biases in the
cross-section and over time, the controversy momentum remains
comparable across companies through time and across regions.
European investors price controversies more aggressively than their
U.S. counterparts, which supports the commonly held view that the
European investment community has achieved a more robust integration
of sustainability issues into their investment process. Controversies
tend to get priced in more rapidly in the U.S., necessitating a more
refined timing strategy.
Integrating controversy-based signals into investment strategies can
beneficially impact portfolio performance, but sparse signals only
lead to marginal improvements.
Download the whitepaper for details on our model, and integrate a comprehensive ESG controversy scoring framework into your long-standing investment strategies.
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RavenPack’s ESG Controversy Scoring Framework
is based on real-time detections of events across 40,000+ news sources in 13 different languages.
It follows an event-based approach that can help assess the extent of a firm’s ESG controversy exposure through time by monitoring real-time news coverage.