Hübel B, Scholz H (2020)
Publication Language: English
Publication Type: Journal article
Publication year: 2020
Book Volume: 21
Pages Range: 52-69
Journal Issue: 1
DOI: 10.1057/s41260-019-00139-z
Open Access Link: https://rdcu.be/bXnLJ
The rising sustainability awareness among regulators, consumers and investors results in major sustainability risks for firms. We construct three ESG risk factors (Environmental, Social, and Governance) to quantify the ESG risk exposures of firms. Taking these factors into account significantly enhances the explanatory power of standard asset pricing models. We find that portfolios with pronounced ESG risk exposures exhibit substantially higher risks, but investors can compose portfolios with lower ESG risks while keeping risk-adjusted performance virtually unchanged. Moreover, investors can measure the ESG risk exposures of all firms in their portfolios using only stock returns, so that even stocks without qualitative ESG information can be easily considered in the management of ESG risks. Indeed, strategically managing ESG risks may result in potential benefits for investors
APA:
Hübel, B., & Scholz, H. (2020). Integrating sustainability risks in asset management: The role of ESG exposures and ESG ratings. Journal of Asset Management, 21(1), 52-69. https://dx.doi.org/10.1057/s41260-019-00139-z
MLA:
Hübel, Benjamin, and Hendrik Scholz. "Integrating sustainability risks in asset management: The role of ESG exposures and ESG ratings." Journal of Asset Management 21.1 (2020): 52-69.
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