The EDHEC Scientific Beta “Advanced Factor & ESG Investing” Research Chair was set up to transfer academic knowledge to the investment industry by providing high-quality research for decision-makers in the professional arena. This special webinar presents the research findings of the "Sustainable Investing with ESG Rating Uncertainty" publication in which the authors analyse the equilibrium implications of ESG rating disagreement for portfolio decisions and asset pricing.
Presenting research findings from the EDHEC Scientific Beta "Advanced Factor & ESG Investing" Research Chair
The EDHEC Scientific Beta “Advanced Factor & ESG Investing” research chair was set up to transfer academic knowledge to the investment industry by providing high-quality research for decision-makers in the professional arena. The primary motivation for the research chair is to respond to real-world questions regarding factor investing with research that is recognised for its scientific quality.
At a special webinar held on March 4, 2021 at 10.00am CET, we presented the research findings of the "Sustainable Investing with ESG Rating Uncertainty" publication in which the authors analyse the equilibrium implications of ESG rating disagreement for portfolio decisions and asset pricing.
Rating disagreement leads to higher effective risk aversion, higher market premium, and lower demand for stocks. Disagreement also tilts the negative ESG-CAPM alpha relation and affects the systematic risk exposure of individual stocks. Combining ESG ratings from six major rating agencies, we provide supporting evidence for the model predictions. Our findings help reconcile the mixed evidence on the cross-sectional return predictability of ESG ratings and they suggest that the lack of consistency in ESG ratings could distort the risk-return trade-off.
The webinar was scheduled as follows: