Can we trust research on ESG?
Several of the most important research papers on ESG have proven to be fragile or unreliable (see here, here, here, and here).? Now I believe I have found errors and defects in perhaps the most important one: “The Impact of Corporate Sustainability on Organizational Processes and Performance”.? This publication appeared early in the development of ESG and became extremely influential.? It was adopted by Wall Street fund managers, submitted in testimony before the US Senate, and referenced in a keynote speech by the former commissioner of the SEC.? Unfortunately, as I report in a new posting on SSRN, its most critical finding seems to be based on a math error and its main method seems unworkable as reported.
With so many ESG papers being reversed on further review, I encourage everyone to be extra cautious when interpreting ESG research.? At least until the results have been checked.
P.S.? My paper is still under review.? So, be cautious with mine too.
Vice President of Sales at Tuttle Capital Management
1 年Does ESG piss U off? Tuttle Capital Management believes that companies that don’t engage in politics at all, meaning they focus on profits and nothing else, should do better than companies that spend time and money on creating social change. We screened for stocks with Neutral lowest social scores put them into TCM's proprietary Shareholders First Index.? Please read: https://seekingalpha.com/article/4634254-profits-not-politics https://tuttlecap.com/shareholders-first-index
Assistant Professor at University of Toronto
1 年Such important work!
Entre(Intra)preneur | Impact & Risk Assessment | Systems Thinker - Opinions are my own
1 年Quality matters! Back in my EPA days I read plenty of papers attempting to find meaningful relationships between ESG/env. performance and financial performance. Most suffered from methodological issues. My conclusion then, and confirmed here again, is that these studies are damn hard to do: an unpriced resource, undervalued at best, voluntary data and exceedingly complex or naive models that undermine quality, in addition to error in analysis.
President and Co-Founder, Sustainable Finance Institute; Lecturer, Yale, NYU, Brown, Harvard
1 年Not fixable, because climate and impact are future phenomenons, ergo any attempt to analyze the past as academic research requires, will fail to help encourage what is needed going forward, and as a result the entirety of academic papers on the subject (and related peer review processes) are easily gamed, hence your understandable findings that in the history of papers on ESG almost none of them hold up or are actually useful - what is useful are case studies of investment that lead to climate/impact and financial success that can be scaled for purpose, and of which there aren’t nearly enough
One of the authors, Robert Eccles is known (1) for his paid effort to rebrand Philip Morris International as an ESG company. So who is surprised that ESG may be in a replicability crisis when the biggest ESG academics work for Big Tobacco? REFERENCE: (1) https://tobaccotactics.org/article/professor-robert-eccles/