{"id":119586,"date":"2025-06-23T11:02:55","date_gmt":"2025-06-23T15:02:55","guid":{"rendered":"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/sustainable-finance\/are-esg-scores-relevant-for-portfolio-returns\/"},"modified":"2026-01-23T17:41:23","modified_gmt":"2026-01-23T22:41:23","slug":"are-esg-scores-relevant-for-portfolio-returns","status":"publish","type":[3762],"link":"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/sustainable-finance\/are-esg-scores-relevant-for-portfolio-returns\/","title":{"rendered":"Are ESG scores relevant for portfolio returns?"},"content":{"rendered":"<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-compact row-padding--bottom-none bbg-row--full-bg-bleed\" data-anchor='row-6a078383e52f1'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-7\"\n    style=\"\"\n    >\n    <p><div\n    class=\"bbg-spacer bbg-spacer--lg\"\n    >\n<\/div><div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p class=\"small\"><strong><span style=\"font-size: 14px; letter-spacing: 1px; color: #0062dd;\">ARTICLE<\/span><\/strong><\/p>\n\n<\/div>\n<div\n    class=\"bbg-spacer bbg-spacer--sm\"\n    >\n<\/div>    <h1 class=\"bbg-metadata bbg-metadata--title\">Are ESG scores relevant for portfolio returns?<\/h1>\n<div\n    class=\"bbg-spacer\"\n        style=\"height: 50px !important\"\n    >\n<\/div>    <ul class=\"bbg-categories_list\">\n                    <li>\n                <a href=\"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/category\/data\/\" rel=\"category tag\">\n                    Data\n                <\/a>\n            <\/li>\n                    <li>\n                <a href=\"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/category\/markets\/\" rel=\"category tag\">\n                    Markets\n                <\/a>\n            <\/li>\n                    <li>\n                <a href=\"https:\/\/professional.content.cirrus.bloomberg.com\/professional2023\/insights\/category\/sustainable-finance\/\" rel=\"category tag\">\n                    Sustainable Finance\n                <\/a>\n            <\/li>\n            <\/ul>\n<\/p>\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-5\"\n    style=\"\"\n    >\n    <div id=\"\" class=\"wpb_content_element bbg-single-image align-left\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"800\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/10\/359994242.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"A solar panel farm\" title=\"Solar Panel Farm\" \/>\n        \n            <\/figure>\n<\/div>\n\n\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-none row-padding--bottom-none bbg-row--full-bg-bleed\" data-anchor='row-6a078383f0920'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-6 bbg-column--m-width-6\"\n    style=\"\"\n    >\n    <p>    <p class=\"bbg-metadata bbg-metadata--date\">June 23, 2025<\/p>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><strong>Bloomberg Professional Services<\/strong><\/p>\n\n<\/div>\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2 bbg-column--valign-middle bbg-column--m-width-2 bbg-column--s-padding-right-2\"\n    style=\"\"\n    >\n    <div class=\"bb-tts\"\n\tdata-selector=\"main\"\n\tdata-label=\"Speak this page\"\n\tdata-custom-play=\"Play\"\n\tdata-custom-pause=\"Pause\"\n\tdata-custom-stop=\"Stop\"\n\tdata-overlay=\"false\"\n\tdata-invert=\"false\"\n\tdata-no-time=\"false\"\n\tdata-no-button-text=\"false\"\n\tdata-one-button=\"true\"\n\tdata-one-style=\"true\"\n\tdata-hide-stop=\"true\"\n\tdata-voice=\"Gordon\"\n\tdata-pitch=\"1\"\n\tdata-speed=\"1\"\n\tdata-align=\"flex-start\"\n>\n<\/div>\n\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-none row-padding--bottom-compact bbg-row--full-bg-bleed\" data-anchor='row-6a078383f3ffb'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8 bbg-column--has-bg-color\"\n    style=\"background-color:#e6f3ff;border-radius: 16px 16px 16px 16px;\"\n    >\n    <div class=\"wpb_content_element bbg-card  bbg-card-custom bbg-card-text-black\" id=\"card_1\" data-card_type=\"no_image\">\n      <style>#card_1 .bbg-card__innerwrapper {background-color: #e6f3ff;}#card_1 .bbg-card__innerwrapper {\n\tborder: 1px solid #e6f3ff !important;\n\t}#card_1:hover .bbg-card__innerwrapper {\n\tborder: 1px solid #e6f3ff !important;\n\t}#card_1 .bbg-card__innerwrapper {\n\tpadding: calc(var(--brand-large-padding, 40px) - 1px) !important;\n\t}#card_1 .bbg-card__innerwrapper .bbg-card__title {\n\tcolor: #000000 !important;\n\t}#card_1 .bbg-card__innerwrapper .bbg-card__content,#card_1 .bbg-card__innerwrapper .bbg-card__content p  {\n\tcolor: #000000 !important;\n\t}#card_1.bbg-card_hasImage .bbg-card__innerwrapper{padding-top: calc(var(--brand-default-padding, 16px) - 1px);padding-left: calc(var(--brand-default-padding, 16px) - 1px);padding-right: calc(var(--brand-default-padding, 16px) - 1px);}<\/style>\n  \n  \n  <div class=\"bbg-card__innerwrapper\">\n    <div class=\"bbg-card__content\">\n      \n              <div class=\"bbg-card__eyebrow\" style=\"color: #000000\">KEY TAKEAWAYS<\/div>\n      \n      \n              <div class=\"bbg-card__wysiwyg bb-wysiwyg\"><\/p>\n<ul>\n<li><span class=\"TextRun SCXW209190507 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun CommentStart SCXW209190507 BCX0\">We <\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">find <\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">evidence that<\/span><span class=\"NormalTextRun SCXW209190507 BCX0\"> c<\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">ompanies w<\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">ith higher Bloomberg ESG Score<\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">s<\/span><span class=\"NormalTextRun SCXW209190507 BCX0\"> outperform<\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">ed<\/span> <span class=\"NormalTextRun SCXW209190507 BCX0\">those<\/span><span class=\"NormalTextRun SCXW209190507 BCX0\"> with lower <\/span><span class=\"NormalTextRun CommentStart SCXW209190507 BCX0\">ones<\/span> <span class=\"NormalTextRun SCXW209190507 BCX0\">in <\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">terms of <\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">total and risk-adjusted return<\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">s<\/span><span class=\"NormalTextRun SCXW209190507 BCX0\">.<\/span><\/span><span class=\"EOP SCXW209190507 BCX0\" data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/li>\n<li><span class=\"TextRun SCXW94390682 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun CommentStart SCXW94390682 BCX0\"><span class=\"TextRun SCXW105233313 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW105233313 BCX0\">There are indications that ESG Scores function better<\/span><\/span><\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">\u00a0when underpinned by more quantitative informa<\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">tion<\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">.<\/span> <span class=\"NormalTextRun SCXW94390682 BCX0\">Accordingly<\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">, <\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">s<\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">tewardship teams <\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">should <\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">engage with their <\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">portfolio companies to <\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">encourage <\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">more<\/span><span class=\"NormalTextRun SCXW94390682 BCX0\"> quantitative ESG <\/span><span class=\"NormalTextRun SCXW94390682 BCX0\">data disclosure.<\/span><\/span><span class=\"EOP SCXW94390682 BCX0\" data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/li>\n<li><span class=\"TextRun SCXW202507800 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW202507800 BCX0\">The observed outperformance of companies with higher ESG Scores cannot be attributed solely to incidental exposure to traditional risk factors.<\/span> <\/span><span class=\"TextRun SCXW202507800 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW202507800 BCX0\">This suggests the Scores could<\/span> <span class=\"NormalTextRun SCXW202507800 BCX0\">contain<\/span><\/span><span class=\"TextRun SCXW202507800 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"> <span class=\"NormalTextRun SCXW202507800 BCX0\">overlooked<\/span><span class=\"NormalTextRun SCXW202507800 BCX0\"> or underpriced information.<\/span><\/span><span class=\"EOP SCXW202507800 BCX0\" data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/li>\n<\/ul>\n<p>\n<\/div>\n          <\/div>\n\n      <\/div>\n\n  <\/div>\n\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-compact row-padding--bottom-compact bbg-row--full-bg-bleed\" data-anchor='row-6a0783840499e'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><i><span style=\"font-weight: 400;\">This article was written by <span class=\"TextRun SCXW218714909 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SpellingErrorV2Themed SCXW218714909 BCX0\">Zarvan<\/span> <span class=\"NormalTextRun SpellingErrorV2Themed SCXW218714909 BCX0\">Khambatta<\/span><span class=\"NormalTextRun SCXW218714909 BCX0\">, Head of Sustainable Investments Quantitative Research, <span class=\"TextRun SCXW231158699 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW231158699 BCX0\">Michael Zhang, and <span class=\"NormalTextRun SCXW179411126 BCX0\">Didier <\/span><span class=\"NormalTextRun SpellingErrorV2Themed SCXW179411126 BCX0\">Darricau, <\/span><\/span><span class=\"NormalTextRun SCXW231158699 BCX0\">Senior<\/span><span class=\"NormalTextRun SCXW231158699 BCX0\"> Sustainable Investments Quantitative Researchers at Bloomberg.<\/span><\/span><span class=\"EOP SCXW231158699 BCX0\" data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/span><\/span><\/span><\/i><\/p>\n<p><span class=\"TextRun SCXW40621595 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW40621595 BCX0\">Investors pay attention to non-financial company data<\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">,<\/span> <span class=\"NormalTextRun SCXW40621595 BCX0\">i<\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">n particular, environmental<\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">, social and governance (\u201cESG\u201d) data and <\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">scores<\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">,<\/span> <span class=\"NormalTextRun SCXW40621595 BCX0\">for<\/span> <span class=\"NormalTextRun SCXW40621595 BCX0\">a variety of<\/span><span class=\"NormalTextRun SCXW40621595 BCX0\"> reasons. Regardless of their <\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">specific <\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">motivation<\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">s<\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">, investors <\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">are likely to <\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">be interested in ESG scores if they <\/span><span class=\"NormalTextRun ContextualSpellingAndGrammarErrorV2Themed SCXW40621595 BCX0\">can be shown to<\/span><span class=\"NormalTextRun SCXW40621595 BCX0\"> have a meaningful impact on <\/span><span class=\"NormalTextRun SCXW40621595 BCX0\">portfolio returns and risks.<\/span><\/span><\/p>\n\n<\/div>\n\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-none row-padding--bottom-none bbg-row--full-bg-bleed\" data-anchor='row-6a07838406c55'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-3\"\n    style=\"\"\n    >\n    <p><div\n    class=\"bbg-spacer bbg-spacer--sm\"\n    >\n<\/div><hr class=\"bbg-separator bbg-separator-1\" style=\"height:1px;\" \/>\n<div\n    class=\"bbg-spacer\"\n        style=\"height: 32px !important\"\n    >\n<\/div><div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p class=\"small\"><strong><span style=\"font-size: 14px; letter-spacing: 1px;\">PRODUCT MENTIONS<\/span><\/strong><\/p>\n\n<\/div>\n\n<div\n  id=\"cta_4108238708117187333\"\n  class=\"wpb_content_element bbg-cta no-icon\">\n  <style>\n    \n    \n    \n  <\/style>\n  <div\n    class=\"bbg-cta-link link-holder\"\n    data-links-type=\"cta-links\">\n    <p class=\"bbg-cta-p left\">\n      <a\n        class=\"bbg-cta-link link\"\n        href=\"https:\/\/www.bloomberg.com\/professional\/solutions\/sustainable-finance\/\"\n        target=\"\"\n        rel=\"\"\n        data-section-name=\"Bloomberg ESG and Sustainable Finance Solutions\"\n        >\n                      Bloomberg ESG and Sustainable Finance Solutions\n                <\/a>\n    <\/p>\n  <\/div>\n<\/div>\n<div\n    class=\"bbg-spacer bbg-spacer--sm\"\n    >\n<\/div>\n<div\n  id=\"cta_5970812897255841091\"\n  class=\"wpb_content_element bbg-cta no-icon\">\n  <style>\n    \n    \n    \n  <\/style>\n  <div\n    class=\"bbg-cta-link link-holder\"\n    data-links-type=\"cta-links\">\n    <p class=\"bbg-cta-p left\">\n      <a\n        class=\"bbg-cta-link link\"\n        href=\"https:\/\/www.bloomberg.com\/professional\/products\/indices\"\n        target=\"\"\n        rel=\"\"\n        data-section-name=\"Bloomberg Indices\"\n        >\n                      Bloomberg Indices\n                <\/a>\n    <\/p>\n  <\/div>\n<\/div>\n<div\n    class=\"bbg-spacer bbg-spacer--sm\"\n    >\n<\/div>\n<div\n  id=\"cta_1844957462733212768\"\n  class=\"wpb_content_element bbg-cta no-icon\">\n  <style>\n    \n    \n    \n  <\/style>\n  <div\n    class=\"bbg-cta-link link-holder\"\n    data-links-type=\"cta-links\">\n    <p class=\"bbg-cta-p left\">\n      <a\n        class=\"bbg-cta-link link\"\n        href=\"https:\/\/www.bloomberg.com\/professional\/products\/indices\/esg-climate\"\n        target=\"\"\n        rel=\"\"\n        data-section-name=\"Bloomberg ESG and Climate Indices\"\n        >\n                      Bloomberg ESG and Climate Indices\n                <\/a>\n    <\/p>\n  <\/div>\n<\/div>\n<div\n    class=\"bbg-spacer\"\n        style=\"height: 32px !important\"\n    >\n<\/div><hr class=\"bbg-separator bbg-separator-1\" style=\"height:1px;\" \/>\n<\/p>\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-1\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-6\"\n    style=\"\"\n    >\n    <div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span class=\"TextRun SCXW62002819 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW62002819 BCX0\">Using the <\/span><span class=\"NormalTextRun SCXW62002819 BCX0\">Bloomberg World Large &amp; Mid Cap Index<\/span><span class=\"NormalTextRun SCXW62002819 BCX0\"> (WORLD Index) <\/span><span class=\"NormalTextRun SCXW62002819 BCX0\">and <\/span><span class=\"NormalTextRun SCXW62002819 BCX0\">Bloomberg World Large, Mid &amp; Small Cap Index<\/span><span class=\"NormalTextRun SCXW62002819 BCX0\"> (WLS Index) <\/span><span class=\"NormalTextRun SCXW62002819 BCX0\">as examples, we <\/span><span class=\"NormalTextRun SCXW62002819 BCX0\">see<\/span> <span class=\"NormalTextRun SCXW62002819 BCX0\">evidence <\/span><span class=\"NormalTextRun SCXW62002819 BCX0\">of <\/span><span class=\"NormalTextRun SCXW62002819 BCX0\">companies with hi<\/span><span class=\"NormalTextRun SCXW62002819 BCX0\">gher Bloomberg ESG Scores earning<\/span><span class=\"NormalTextRun SCXW62002819 BCX0\"> higher returns (as well as higher risk-adjusted returns) than companies with lower ESG Scores.\u00a0<\/span><\/span><span class=\"EOP SCXW62002819 BCX0\" data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">These excess returns are not entirely accounted for by exposure to known risk factors, such as country, industry or styles (e.g., value, quality), and could point to the Scores containing information that is not captured by traditional factor models.\u00a0<\/span><span data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/p>\n\n<\/div>\n\n\n<\/div><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-compact row-padding--bottom-none bbg-row--full-bg-bleed\" data-anchor='row-6a0783840bc69'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span data-contrast=\"none\">Nevertheless, the overall evidence is mixed and warrants further analysis. We observe variations in the relationship between ESG Scores and returns across regions, sectors and market capitalizations.<\/span><\/p>\n\n<\/div>\n\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-none row-padding--bottom-none bbg-row--margin-top-compact bbg-row--margin-bottom-compact bbg-row--full-bg-bleed\" data-anchor='row-6a0783840da2e'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <div\n    class=\"bbg-column\"\n    style=\"\"\n    >\n    <div class=\"bbg-interstitial\" aria-label=\"interstitial\" tabindex=\"0\">\n\t<style>\n\t\t.bbg-interstitial #card_2.bbg-card_hasCta{\n\t\t\tbackground: url(https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Interstitial_bg.png);\n\t\t\t\tbackground-repeat: no-repeat;\n\t\t\t\tbackground-position: center center;\n\t\t\t\tbackground-size: cover;\n\t\t\tpadding: 104px;\n\t\t\t\n\t\t\t\n\t\t}\n\t\t.bbg-interstitial #card_2.bbg-card_hasCta .bbg-card__content, .bbg-interstitial #card_2.bbg-card_hasCta .bbg-card__content p{\n\t\t\tcolor:white;\n\t\t}\n\t\t@media (max-width: 768px) {\n\t\t\t.bbg-interstitial #card_2.bbg-card_hasCta{\n\t\t\t\tpadding: 80px 32px;\n\t\t\t}\n\t\t}\n\t\t@media (max-width: 480px) {\n\t\t\t.bbg-interstitial #card_2.bbg-card_hasCta{\n\t\t\t\tpadding: 80px 18px;\n\t\t\t}\n\t\t}\n\t<\/style>\n\t<div class=\"wpb_content_element bbg-card  bbg-card-dark bbg-card_hasCta has_interstitial\" id=\"card_2\" data-card_type=\"no_image\">\n  \n  \n  <div class=\"bbg-card__innerwrapper\">\n    <div class=\"bbg-card__content\">\n      \n      \n                      <h3 class=\"bbg-card__title\">Discover more with Bloomberg newsletters<\/h3>\n      \n              <div class=\"bbg-card__wysiwyg bb-wysiwyg\"><p>Subscribe now<\/p>\n<\/div>\n          <\/div>\n\n          \n<div\n  id=\"cta_4217875183809455566\"\n  class=\"wpb_content_element bbg-cta icon icon-arrow\">\n  <style>\n    \n    \n    \n  <\/style>\n  <div\n    class=\"bbg-cta-link link-holder\"\n    data-links-type=\"cta-links\">\n    <p class=\"bbg-cta-p right\">\n      <a\n        class=\"bbg-cta-link link interstitial_cta\"\n        href=\"https:\/\/www.bloomberg.com\/professional\/insights\/newsletter\/\"\n        target=\"\"\n        rel=\"\"\n        data-section-name=\"\"\n                role=\"button\"\n        aria-label=\"Learn more\"\n        >\n                <\/a>\n    <\/p>\n  <\/div>\n<\/div>\n\n      <\/div>\n\n  <\/div>\n\n<\/div>\n\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <section class=\"bbg-row  text--black row-padding--top-compact row-padding--bottom-none bbg-row--full-bg-bleed\" data-anchor='row-6a07838411790'>\n        \n        \n        <div\n            class=\"bbg-row--content\"\n                    >\n            \n            <p><div\n    class=\"bbg-column bbg-column--width-2\"\n    style=\"\"\n    >\n    \n<\/div><div\n    class=\"bbg-column bbg-column--width-8\"\n    style=\"\"\n    >\n    <div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2><span class=\"TextRun SCXW195781507 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW195781507 BCX0\">Examining<\/span><span class=\"NormalTextRun SCXW195781507 BCX0\"> performance <\/span><\/span><span class=\"EOP CommentStart SCXW195781507 BCX0\" data-ccp-props=\"{&quot;134233117&quot;:false,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559685&quot;:0,&quot;335559737&quot;:0,&quot;335559738&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:278}\">\u00a0<\/span><\/h2>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span data-contrast=\"none\">We begin by analyzing a universe of companies in a global, broadly diversified equity benchmark index. T<\/span><span data-contrast=\"auto\">he <\/span><span data-contrast=\"none\">Bloomberg World Large &amp; Mid Cap Index (\u201cWORLD Index &lt;Go&gt;\u201d on the Bloomberg Terminal) is a float market-cap-weighted equity benchmark that covers the top 85% of market cap of the measured market. Bloomberg\u2019s ESG Scores <\/span><span data-contrast=\"auto\">cover 96% of the WORLD Index\u2019s constituents and 99% of its market value as of December 2024. In <\/span><span data-contrast=\"none\">this analysis, we excluded companies in the WORLD Index that were not in the Scores universe.<\/span><span data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"none\">Each quarter, we sort the companies in the WORLD Index into quintiles based on their Bloomberg ESG Zero-Centered Scores (\u201cZCS\u201d).\u00a0\u00a0ZCS <\/span><span data-contrast=\"auto\">provide a cross-peer group comparable version of the Bloomberg Environmental, Social and Governance (ESG) Score. ZCS range from -10 to 8.5 (higher is better) and represent the difference between a company&#8217;s ESG Score and its peer group&#8217;s median ESG Score (floored at 1.5). Thus, the median company in a peer group has a ZCS of 0, outperforming companies have ZCS greater than 0 and underperforming companies have ZCS less than 0. Any two companies, from any peer groups, that have the same ZCS could be considered to be out-\/under-performing their specific peer group medians by the same margin.<\/span><span data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1097\" height=\"597\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1-ESG.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WORLD Index Equal-weighted Quintile Portfolios (Feb 2017 - March 2025)\" title=\"WORLD Index Equal-weighted Quintile Portfolios (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1-ESG.jpg 1097w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1-ESG.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1-ESG.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1-ESG.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1-ESG.jpg 192w\" sizes=\"auto, (max-width: 1097px) 100vw, 1097px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1119\" height=\"563\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1b-ESG.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WORLD Index Market value-weighted Quintile Portfolios (Feb 2017 - March 2025)\" title=\"WORLD Index Market value-weighted Quintile Portfolios (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1b-ESG.jpg 1119w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1b-ESG.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1b-ESG.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1b-ESG.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-1b-ESG.jpg 192w\" sizes=\"auto, (max-width: 1119px) 100vw, 1119px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span data-contrast=\"auto\">The results in <\/span><span data-contrast=\"auto\">Figures 1a and 1b<\/span><span data-contrast=\"auto\"> show that companies in the top ESG quintile generated higher returns and realized higher Sharpe ratios compared to companies in the bottom quintile. This was true for both equal-weighted and market value-weighted quintile portfolios, indicating that the result is not entirely attributable to a \u201csize\u201d effect.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559685&quot;:0,&quot;335559737&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">This finding is encouraging, but it should be noted that the differences between the top and bottom quintiles\u2019 Sharpe ratios do not meet the standard of statistical significance. This is because the differences are not extremely large and the history of the back-test is somewhat limited. While random variation cannot be ruled out as the reason for the outperformance we see here, the result and Scores are worthy of further investigation.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559685&quot;:0,&quot;335559737&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2><span class=\"TextRun SCXW104838390 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW104838390 BCX0\" data-ccp-parastyle=\"Normal (Web)\">Data <\/span><span class=\"NormalTextRun SCXW104838390 BCX0\" data-ccp-parastyle=\"Normal (Web)\">d<\/span><span class=\"NormalTextRun SCXW104838390 BCX0\" data-ccp-parastyle=\"Normal (Web)\">isclosure <\/span><span class=\"NormalTextRun SCXW104838390 BCX0\" data-ccp-parastyle=\"Normal (Web)\">and <\/span><span class=\"NormalTextRun SCXW104838390 BCX0\" data-ccp-parastyle=\"Normal (Web)\">ESG Score <\/span><span class=\"NormalTextRun SCXW104838390 BCX0\" data-ccp-parastyle=\"Normal (Web)\">e<\/span><span class=\"NormalTextRun SCXW104838390 BCX0\" data-ccp-parastyle=\"Normal (Web)\">ffectiveness<\/span><\/span><span class=\"EOP SCXW104838390 BCX0\" data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/h2>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span data-contrast=\"auto\">We now expand our study universe to an index that also includes small-cap stocks. The Bloomberg World Large, Mid &amp; Small Cap Index (\u201cWLS Index &lt;Go&gt;\u201d on the Bloomberg Terminal) is a float market-cap-weighted equity benchmark that covers the top 99% of market cap of the measured market. Bloomberg\u2019s ESG Scores cover 81% of the WLS Index\u2019s constituents and 96% of its market value as of December 2024. In this analysis, we excluded companies in the WLS Index that were not in the Scores universe.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Here, the results between equally-weighted and market value-weighted quintile portfolios were not consistent. Results are presented in <\/span><span data-contrast=\"auto\">Figures 2a and 2b. <\/span><span data-contrast=\"auto\">The market value-weighted portfolios had similar results to those in Figure 1b\u2014the top quintile outperformed the bottom quintile.\u00a0This is unsurprising since the smallest companies do not have much influence in market value-weighted portfolios. However, the equal-weighted quintile portfolios indicated that the Scores were not capable of accurately predicting companies\u2019 future returns.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1092\" height=\"564\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-2-ESG.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WLS Index Equal-weighted Quintile Portfolios (Feb 2017 - March 2025)\" title=\"WLS Index Equal-weighted Quintile Portfolios (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-2-ESG.jpg 1092w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-2-ESG.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-2-ESG.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-2-ESG.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-2-ESG.jpg 192w\" sizes=\"auto, (max-width: 1092px) 100vw, 1092px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1101\" height=\"563\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-2b-ESG.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WLS Index Market value-weighted Quintile Portfolios (Feb 2017 - March 2025)\" title=\"WLS Index Market value-weighted Quintile Portfolios (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-2b-ESG.jpg 1101w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-2b-ESG.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-2b-ESG.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-2b-ESG.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-2b-ESG.jpg 192w\" sizes=\"auto, (max-width: 1101px) 100vw, 1101px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span data-contrast=\"auto\">We hypothesize that a possible reason for the observed discrepancy between the equal-weighted results in the WORLD and WLS indices is the addition of several thousand smaller stocks in the WLS Index and the known relationship between company size and disclosure of ESG data.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Since smaller companies have, in aggregate, tended to disclose much less information than their larger counterparts, it is conceivable that the Scores of companies with low disclosure do not have the same significance as Scores of companies with high levels of disclosure.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">To explore whether the quantity of disclosed data influences the Scores\u2019 ability to differentiate, we partition the companies in the WLS Index into four tiers of ESG data disclosure levels. Within each of these four tiers, we form quintile portfolios based on companies\u2019 ZCS, as before. The set criteria for levels of disclosure and the resulting counts of securities in each tier are presented in <\/span><span data-contrast=\"auto\">Figure 3.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1278\" height=\"652\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Figure-3.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"Criteria for ESG Disclosure Tiers\" title=\"Criteria for ESG Disclosure Tiers\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Figure-3.jpg 1278w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Figure-3.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Figure-3.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Figure-3.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Figure-3.jpg 192w\" sizes=\"auto, (max-width: 1278px) 100vw, 1278px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span class=\"TextRun SCXW71184684 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">Evaluating performance across <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">the four <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">disclosure <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">tiers<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">, we <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">see evidence of<\/span> <span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">a <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">positive <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">link between <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">ESG Scores and stock returns at <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">H<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">igh and Average levels of quantitative data disclosure.<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\"> However, when quantitative disclosure is Low or non-existent<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\"> for the Environmental and Social <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">pillars,<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\"> we do not see such a pattern<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">. These results, shown in <\/span><\/span><span class=\"TextRun SCXW71184684 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">Figure<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">s<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\"> 4<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">a and 4b<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">, support the hypothesis that the usefulness of ESG Scores as an indicator of returns is<\/span><\/span><span class=\"TextRun SCXW71184684 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">\u00a0influenced by the <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">amount <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">of quantitative data disclosure<\/span> <span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">supporting <\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">the Scores<\/span><span class=\"NormalTextRun SCXW71184684 BCX0\" data-ccp-parastyle=\"Normal (Web)\">.<\/span><\/span><span class=\"EOP SCXW71184684 BCX0\" data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1125\" height=\"742\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-4a1.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"Equal-Weighted Quintile Portfolios Annualized Returns by Disclosure Tier (Feb 2017 - March 2025)\" title=\"Equal-Weighted Quintile Portfolios Annualized Returns by Disclosure Tier         (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-4a1.jpg 1125w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-4a1.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-4a1.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-4a1.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/CHart-4a1.jpg 164w\" sizes=\"auto, (max-width: 1125px) 100vw, 1125px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1116\" height=\"729\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-4b-ESG.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"Market Value-Weighted Quintile Portfolios Annualized Returns by Disclosure Tier (Feb 2017 - March 2025)\" title=\"Market Value-Weighted Quintile Portfolios Annualized Returns by Disclosure Tier (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-4b-ESG.jpg 1116w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-4b-ESG.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-4b-ESG.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-4b-ESG.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-4b-ESG.jpg 165w\" sizes=\"auto, (max-width: 1116px) 100vw, 1116px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span class=\"TextRun SCXW159207884 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW159207884 BCX0\">R<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">epeating the analysis from Figures 1 and 2, but<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\"> this time filtering only<\/span> <span class=\"NormalTextRun SCXW159207884 BCX0\">for <\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">those <\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">companies with High or Average levels of quantitative data disclosure produced an improved distribution of quintile portfolio returns<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">\u00a0in both the WORLD <\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">Index <\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">and WLS <\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">I<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">ndex <\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">universes.<\/span> <span class=\"NormalTextRun SCXW159207884 BCX0\">The results<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">,<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\"> shown in <\/span><\/span><span class=\"TextRun SCXW159207884 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW159207884 BCX0\">Figures 5<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\"> and <\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">6<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">,<\/span><\/span><span class=\"TextRun SCXW159207884 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"auto\"> <span class=\"NormalTextRun SCXW159207884 BCX0\">reinforce our belief that <\/span><span class=\"NormalTextRun ContextualSpellingAndGrammarErrorV2Themed SCXW159207884 BCX0\">the ESG<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\"> Scores are more effective when they are<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\"> informed<\/span><span class=\"NormalTextRun SCXW159207884 BCX0\"> by <\/span><span class=\"NormalTextRun SCXW159207884 BCX0\">more data disclosure.<\/span><\/span><span class=\"EOP SCXW159207884 BCX0\" data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1139\" height=\"587\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5a.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WORLD Index Equal-Weighted Quintile Portfolios - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" title=\"WORLD Index Equal-Weighted Quintile Portfolios - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5a.jpg 1139w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5a.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5a.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5a.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5a.jpg 192w\" sizes=\"auto, (max-width: 1139px) 100vw, 1139px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1121\" height=\"590\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5b.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WORLD Index Market Value-Weighted Quintile Portfolios - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" title=\"WORLD Index Market Value-Weighted Quintile Portfolios - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5b.jpg 1121w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5b.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5b.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5b.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-5b.jpg 192w\" sizes=\"auto, (max-width: 1121px) 100vw, 1121px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1133\" height=\"601\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6a-corr.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WLS Index Market Value-Weighted Quintile Portfolios - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" title=\"WLS Index Market Value-Weighted Quintile Portfolios - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6a-corr.jpg 1133w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6a-corr.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6a-corr.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6a-corr.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6a-corr.jpg 192w\" sizes=\"auto, (max-width: 1133px) 100vw, 1133px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1115\" height=\"603\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6b.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WLS Index Market Value-Weighted Quintile Portfolios - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" title=\"WLS Index Market Value-Weighted Quintile Portfolios - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6b.jpg 1115w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6b.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6b.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6b.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-6b.jpg 192w\" sizes=\"auto, (max-width: 1115px) 100vw, 1115px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2><span class=\"TextRun SCXW232010885 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW232010885 BCX0\">Beyond\u00a0<\/span><span class=\"NormalTextRun SCXW232010885 BCX0\">k<\/span><span class=\"NormalTextRun SCXW232010885 BCX0\">nown\u00a0<\/span><span class=\"NormalTextRun SCXW232010885 BCX0\">f<\/span><span class=\"NormalTextRun SCXW232010885 BCX0\">actors:\u00a0<\/span><span class=\"NormalTextRun SCXW232010885 BCX0\">Identifying<\/span><span class=\"NormalTextRun SCXW232010885 BCX0\">\u00a0the \u201cESG Effect\u201d<\/span><span class=\"NormalTextRun SCXW232010885 BCX0\">\u00a0on stock selection<\/span><\/span><span class=\"EOP SCXW232010885 BCX0\" data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/h2>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span data-contrast=\"auto\">When filtered for data disclosure that is High or Average, companies in the top quintile outperformed companies in the bottom quintile in both the WORLD and WLS indices. To further investigate whether this outperformance can be attributed to information contained in the ESG Scores, and not simply to incidental exposure to other risk factors, we conducted a return attribution analysis using Bloomberg\u2019s PORT MAC3 equity risk model.<\/span><span data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">To do this, we formed equal-weighted long-short portfolios for both the WORLD Index and WLS Index universes. These portfolios are long the companies in the top quintile and short the companies in the bottom quintile of Figures 5a and 6a, respectively. As shown in <\/span><span data-contrast=\"auto\">Figures 7a and 7b<\/span><span data-contrast=\"auto\">, a substantial portion of the long-short portfolios\u2019 returns is not \u201cexplained\u201d by exposures to factors such as Industry, Country, Currency or Equity Style (e.g., value, quality).\u00a0<\/span><span data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">This unexplained share is termed the <a href=\"https:\/\/www.bloomberg.com\/professional\/insights\/sustainable-finance\/which-esg-scores-work-best-for-portfolio-construction\/\">&#8220;Selection Effect\u201d<\/a>. In our back-test, the Selection Effect accounted for 38.3% out of 64.7% of cumulative long-short portfolio returns in the WORLD (High and Average disclosure) universe and 9.3% out of 23.7% of cumulative total returns within the WLS disclosure-filtered universe.<\/span><span data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Note that this return <\/span><span data-contrast=\"auto\">attribution is based on monthly down-sampled risk exposures from Bloomberg&#8217;s PORT MAC3 equity risk model, that are produced at a daily frequency. As a result, the attribution results shown here are approximations and may not exactly match analyses performed in PORT &lt;GO&gt;.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:false,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335551550&quot;:1,&quot;335551620&quot;:1,&quot;335559685&quot;:0,&quot;335559737&quot;:0,&quot;335559738&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:257}\">\u00a0<\/span><\/p>\n\n<\/div>\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1113\" height=\"446\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-7a.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WORLD Index Equal-Weighted Long-Short Portfolio Return Attribution - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" title=\"WORLD Index Equal-Weighted Long-Short Portfolio Return Attribution -            High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-7a.jpg 1113w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-7a.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-7a.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-7a.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-7a.jpg 192w\" sizes=\"auto, (max-width: 1113px) 100vw, 1113px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div id=\"\" class=\"wpb_content_element bbg-single-image align-center\">\n    <figure class=\"bbg-single-image__figure\" style=\"max-width:100%\">\n                <img loading=\"lazy\" decoding=\"async\" width=\"1116\" height=\"451\" src=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-ESG-7b.jpg\" class=\"bbg-single-image__image attachment-full\" alt=\"WLS Index Equal-Weighted Long-Short Portfolio Return Attribution - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" title=\"WLS Index Equal-Weighted Long-Short Portfolio Return Attribution - High and Average Disclosure Tier Companies (Feb 2017 - March 2025)\" srcset=\"https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-ESG-7b.jpg 1116w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-ESG-7b.jpg 552w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-ESG-7b.jpg 800w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-ESG-7b.jpg 768w, https:\/\/assets.bbhub.io\/image\/v1\/resize?width=auto&amp;type=webp&amp;url=https:\/\/assets.bbhub.io\/professional\/sites\/41\/Chart-ESG-7b.jpg 192w\" sizes=\"auto, (max-width: 1116px) 100vw, 1116px\" \/>\n        \n            <\/figure>\n<\/div>\n\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<h2><span class=\"TextRun SCXW82406726 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW82406726 BCX0\">Conclusion<\/span><\/span><span class=\"EOP SCXW82406726 BCX0\" data-ccp-props=\"{&quot;335559739&quot;:120}\">\u00a0<\/span><\/h2>\n\n<\/div>\n<div\n\tclass=\"bb-wysiwyg\"\n\t\t>\n\t<p><span data-contrast=\"auto\">We see evidence of outperformance in portfolios that utilized Bloomberg ESG Scores. This effect is more pronounced when the Scores are informed by higher levels of quantitative data disclosure. Thus, investors who believe they can benefit from these signals should encourage their portfolio companies to increase quantitative data disclosure. <\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Investors, whether explicitly focused on ESG criteria or not, may benefit from utilizing ESG Scores in their investment workflows. Furthermore, the performance differentials are not fully explained by traditional risk factors, suggesting that the Scores may contain under-utilized information.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n<p><i><span data-contrast=\"auto\">Bloomberg Terminal subscribers can access Bloomberg ESG Scores at ESG SCORE &lt;GO&gt;. The Scores\u2019 methodologies can be found at BESG &lt;GO&gt; on the Bloomberg ESG Scores tab. For more information click <\/span><\/i><a href=\"https:\/\/bloomberg.com\/professional\/solutions\/sustainable-finance\/\"><i><span data-contrast=\"none\">here<\/span><\/i><\/a><i><span data-contrast=\"auto\"> or <\/span><\/i><a href=\"https:\/\/www.bloomberg.com\/professional\/request-demo\/\"><i><span data-contrast=\"none\">request a demo<\/span><\/i><\/a><i><span data-contrast=\"auto\">.<\/span><\/i><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559739&quot;:120,&quot;335559740&quot;:240}\">\u00a0<\/span><\/p>\n\n<\/div>\n\n<\/div>\n\n\n                    <\/div>\n    <\/section>\n<\/div>\n\n<div  class=\"bbg-row-container\">\n    <style>section[data-anchor=row-6a0783843332a]::before {\n\t\t\t\tbackground-color: #f4f4f9;\n\t\t\t}<\/style>\n    <section class=\"bbg-row bg--custom-color  bg--f4f4f9 text--black bbg-row--full-bg-bleed\" data-anchor='row-6a0783843332a'>\n        \n        \n        <div\n            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potential.<\/p>\n","protected":false},"author":1935,"featured_media":36760,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"template-article.php","format":"standard","meta":{"_yoast_wpseo_primary_category":"524","footnotes":""},"categories":[435,453,524],"tags":[463,3701,3681,3680,547],"series":[],"class_list":["post-119586","post","type-post","status-publish","format-standard","hentry","category-data","category-markets","category-sustainable-finance","tag-data-science-quant","tag-esg-research","tag-esg-strategy","tag-impact-investing","tag-indices","type-article"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.11 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Are ESG scores relevant for portfolio returns? | Insights | Bloomberg Professional Services<\/title>\n<meta name=\"description\" content=\"As investors increasingly consider ESG data in their decision-making, this article explores the effectiveness of 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