Dr ESG

  Author's note:  I have posted the chart and will write more about it this weekend

While Total ESG scores are important, it is also important to remember that each industry/country suffers from heterogeneity with regards to ESG.  This means that while some industries do well with respect to one component of ESG, it may perform poorly with another component.  Thus to really understand what ESG risk means, we need to evaluate the individual components of ESG.  This is easy to do since Sustainalytics calculates Total ESG as the sum of E, S, and G. Below, I present 2 charts.   In the first chart, I present Environmental Risk (E) as a percentage of Total ESG by industry. As we can see industries such as Media have low levels of Environmental Risk while industries -such as - Containers and Packing have high levels of Environmental Risk. From an investment perspective, investors wanting industries with low levels of Environmental Risk should most likely choose companies from industries such as Media, Pharmaceuticals, and Insurance. The second chart s...

  The Total ESG values by industry reported mean values for all the firms in the S&P 500 sample but there are several problems with the data.  The first problem is that there is not an equal distribution of companies across industries. This means that show industries will have a high number of companies in them and some industries will have less than 1.  The second problem is that Yahoo Finance does not have ESG data on all the 500 companies in the S&P 500. Yahoo Finance only has ESG data on 443 companies. Lastly, there is a question of whether to calculate the mean for the industry by the size of the firm: market capitalization value.  All these things need to be investigated. The question of course is how do these problems with the ESG data impact the analysis?  Count of Firms - S&P 500 by Industry Original S&P Chart with all Companies & Industries New Chart with without Industries with less than 3 Firms- 8 industries removed