Integrating sustainability risks in asset management: The role of ESG exposures and ESG ratings

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Publication Details

Author(s): Hübel B, Scholz H
Publication year: 2018
Language: English


Abstract

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 ESG risk exposures of firms.
These ESG factors significantly enhance the explanatory power of standard asset
pricing models. From an investor’s perspective, we find that portfolios with
pronounced ESG risk exposures exhibit substantially higher risks. However, we
show that investors can compose portfolios with lower ESG risks while keeping
risk-adjusted performance unchanged. Moreover, ESG risk exposures enable
investors to measure ESG risks of all firms in their portfolios using stock
returns only.  Therefore, even stocks
without qualitative ESG information can be easily considered in the management
of ESG risks. Finally, strategically managing ESG risks may result in potential
performance benefits for investors.


FAU Authors / FAU Editors

Hübel, Benjamin
Lehrstuhl für Betriebswirtschaftslehre, insbesondere Finanzierung und Banken
Scholz, Hendrik Prof. Dr.
Lehrstuhl für Betriebswirtschaftslehre, insbesondere Finanzierung und Banken


How to cite

APA:
Hübel, B., & Scholz, H. (2018). Integrating sustainability risks in asset management: The role of ESG exposures and ESG ratings.

MLA:
Hübel, Benjamin, and Hendrik Scholz. Integrating sustainability risks in asset management: The role of ESG exposures and ESG ratings. 2018.

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Last updated on 2019-01-03 at 16:53