Investors and analysts ‘still learning to price ESG-related incidents’
Study finds poor ESG practices negatively impact long-term value, but that this is not reflected in short-term stock prices.
Image: Alexey Godzenko/Shutterstock
The world is full of ESG ratings promoting the benefits of a stellar corporate performance on environmental, social and governance factors. But what of the downsides? New research suggests ESG-related incidents can reduce stock performance in the future, though investors appear to be struggling with how to price it in.
The research looked at 80,000 ESG incidents at 2,700 US companies to find out what happened to stock performance after the bad news. It may come as no surprise to learn that stock performance fell over the long term and when new ESG incidents hit the news. But what emerged as a surprise is that many investors fail to price i
For thoughtful journalism, expert insights on corporate governance and an extensive library of reports, guides and tools to help boards and directors navigate the complexities of their roles, subscribe to Board Agenda
Related Stories
-
Research captures shift in purpose for global business
Research from EY reveals a shift in corporate culture and strategy, with two-thirds of board executives polled saying they are "profoundly rethinking" their company's purpose.
-
Human rights due diligence push ‘could turn boards into legal departments’
The European Confederation of Directors Associations warns that forcing big companies to regulate the behaviour of their suppliers could be counterproductive.
-
In the current crisis, less hierarchical companies show special resilience
How can traditional organisations leverage the cultural and behavioural aspects of self-management imposed by the Covid-19 crisis?
