Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Portfolio Management
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Portfolio Management

The Journal of Portfolio Management

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

Foundations of ESG Investing: How ESG Affects Equity Valuation, Risk, and Performance

Guido Giese, Linda-Eling Lee, Dimitris Melas, Zoltán Nagy and Laura Nishikawa
The Journal of Portfolio Management July 2019, 45 (5) 69-83; DOI: https://doi.org/10.3905/jpm.2019.45.5.069
Guido Giese
is an executive director at MSCI Inc. in London, UK
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Linda-Eling Lee
is a managing director at MSCI Inc. in New York, NY
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Dimitris Melas
is a managing director at MSCI Inc. in London, UK
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Zoltán Nagy
is an executive director at MSCI Inc. in Budapest, Hungary
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Laura Nishikawa
is a managing director at MSCI Inc. in New York, NY
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • Article
  • Supplemental
  • Info & Metrics
  • PDF
Loading

Abstract

Many studies have focused on the relationship between companies with strong environmental, social, and governance (ESG) characteristics and corporate financial performance. However, these have often struggled to show that positive correlations—when produced—can in fact explain the behavior. The authors of this article provide a link between ESG information and the valuation and performance of companies, by examining three transmission channels within a standard discounted cash flow model—which they call the cash-flow channel, the idiosyncratic risk channel, and the valuation channel. They tested each of these transmission channels using MSCI ESG Ratings data and financial variables. This showed that companies’ ESG information was transmitted to their valuation and performance, both through their systematic risk profile (lower costs of capital and higher valuations) and their idiosyncratic risk profile (higher profitability and lower exposures to tail risk). The research suggests that changes in a company’s ESG characteristics may be a useful financial indicator. ESG ratings may also be suitable for integration into policy benchmarks and financial analyses.

TOPICS: ESG investing, security analysis and valuation, risk management

  • © 2019 Pageant Media Ltd
View Full Text
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Portfolio Management: 45 (5)
The Journal of Portfolio Management
Vol. 45, Issue 5
July 2019
  • Table of Contents
  • Index by author
  • Complete Issue (PDF)
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Portfolio Management.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Foundations of ESG Investing: How ESG Affects Equity Valuation, Risk, and Performance
(Your Name) has sent you a message from The Journal of Portfolio Management
(Your Name) thought you would like to see the The Journal of Portfolio Management web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Foundations of ESG Investing: How ESG Affects Equity Valuation, Risk, and Performance
Guido Giese, Linda-Eling Lee, Dimitris Melas, Zoltán Nagy, Laura Nishikawa
The Journal of Portfolio Management Jun 2019, 45 (5) 69-83; DOI: 10.3905/jpm.2019.45.5.069

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Foundations of ESG Investing: How ESG Affects Equity Valuation, Risk, and Performance
Guido Giese, Linda-Eling Lee, Dimitris Melas, Zoltán Nagy, Laura Nishikawa
The Journal of Portfolio Management Jun 2019, 45 (5) 69-83; DOI: 10.3905/jpm.2019.45.5.069
del.icio.us logo Digg logo Reddit logo Twitter logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • WHY ESG MATTERS
    • DATA AND METHODOLOGY
    • IDIOSYNCRATIC TRANSMISSION CHANNELS
    • SYSTEMATIC RISK TRANSMISSION CHANNEL
    • FROM CORRELATION TO CAUSALITY
    • ESG MOMENTUM
    • FACTOR INTENSITY AND LONGEVITY
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
  • Supplemental
  • Info & Metrics
  • PDF

Similar Articles

Cited By...

  • The Impact of ESG Risk on Stocks
  • Sustainable and Impact Investing: A Taxonomy of Approaches and Considerations for Fiduciaries
  • Does Sustainable Investing Deprive Unsustainable Firms of Fresh Capital?
  • Deconstructing ESG Ratings Performance: Risk and Return for E, S, and G by Time Horizon, Sector, and Weighting
  • Get Green or Die Trying? Carbon Risk Integration into Portfolio Management
  • Board Effectiveness and Firm Risk
  • Combining E, S, and G Scores: An Exploration of Alternative Weighting Schemes
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • News
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Sign In
  • Update your profile
  • Give us your feedback

© 2022 Pageant Media Ltd | All Rights Reserved | ISSN: 0095-4918 | E-ISSN: 2168-8656

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies