Journal Article10.2139/ssrn.4565408
ESG Reporting Divergence
Qiang Cheng,Yun Lou,Mengjie Yang +2 more
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TL;DR: ESG reporting divergence reduces the usefulness of ESG reporting for ESG rating providers, ESG fund managers, and investors.
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Abstract: In this paper, we provide the first large-sample empirical analysis of the consequences of ESG reporting divergence among U.S. firms. We construct and validate an ESG reporting divergence measure based on the dissimilarities in ESG reporting across firms. We find it to be lower for firm-pairs using the same ESG reporting framework, with similar size, and with similar ESG performance than for other firm-pairs. We find that ESG reporting divergence is positively associated with ESG rating disagreement and weakens the positive association between ESG ratings and ESG fund allocation. These results indicate that ESG reporting divergence reduces the usefulness of ESG reporting for ESG rating providers and ESG fund managers. Furthermore, we find that ESG reporting divergence reduces investors’ reaction to negative ESG news. Finally, we corroborate our findings using a sample of U.S. firms that are likely affected by the EU ESG reporting regulation.
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Citations
The influence of market and institutional factors on ESG rating disagreement
Michele Rubino,Ilaria Mastrorocco,Giovanni Maria Garegnani +2 more
TL;DR: The lack of convergence in ESG ratings leads to disagreement, which is influenced by market value, industry sensitivity, and institutional context.
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The Impact of Emerging Digital Solutions on the Improvement of ESG Evaluations
Cheng Yan
TL;DR: This study reviews ESG rating challenges and explores digital solutions (blockchain, big data, AI) to enhance transparency, disclosure efficiency, and scoring consistency, recommending integration of these technologies with supportive policy frameworks for a more reliable ESG rating ecosystem.
ESG Rates Divergence on the Emerging Markets in the European Union
Diana Elena Vasiu
TL;DR: This study examines ESG rating divergence among three providers on European emerging markets, highlighting challenges in accurate assessments due to varying scoring methods and non-standardized disclosures, and its impact on company performance.
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