S& P 500 ESG Scores : Environmental Risk as a % of Total ESG Risk

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 shows the mean Environmental Risk scores by industry from Yahoo Finance.



Final note, I recently posted this chart on LinkedIn and several people asked about industries that are not on the chart. It should be clear that first, industries with inconsistent data were removed from the chart.  Second, the analysis only covers firms and industries in the S&P 500.

DISCLAIMER: Please be advised that the content is my personal opinion and is intended for education and entertainment purposes only, not financial advice. Nothing herein shall be construed to be financial, legal, or tax advice. Both investing and finance pose a considerable risk of loss. Always do your own ESG research and talk with a professional before making your own investments.




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