Abstract
Sustainable and holistic investment philosophy such as environmental, social and governance (ESG) concepts have now emerged as the subtle, comprehensive and concrete response to the unprecedented surge in environmental, social and financial market sustainable development problems. The main aim of this paper is to perform an in-depth study on ESG ratings world-wide and to granularly analyse how and why they differ within industries and regions as reported by Sustainalytics on 13,589 companies as of December 2022. Perceiving ESG ratings from dual dimensions, we introduce the ‘push–pull effect’ where we identify the rationale pushing corporates for providing their ESG engagements to ESG rating providers and the justification for stakeholders pulling information from these rating providers. Correspondence analysis, nonparametric independent sample Kruskal–Wallis test and Mann–Whitney test are performed as tools of inference. Results reveal that Asia and America are regions demonstrating high ESG risks with European corporates exhibiting low ESG risks. In terms of industry, transportation infrastructure and media, both categorized under low ESG risk, portray a statistically significant difference from other industries. Finally, the sector wise reports clearly evince an overall statistically significant difference between financial and non-financial sector in all regions, the former presenting high risk ESG scores in Asia and North America. Policy implications are set as ESG is a concept which has stepped out of the “awareness creation” stage to an implementation state, imploring policy makers to embark on stringent measures of ensuring ESG compliance to reap stakeholder confidence and ensure sustainable development.
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Appendices
Appendix A
See Table 13
Appendix B: Normality test
Tests of normality | |||
|---|---|---|---|
Kolmogorov-Smirnova | |||
Statistic | df | Sig | |
ESG | 0.038 | 13,589 | 0.000 |
Appendix C: Kruskal–Wallis test—to identify the ESG differences among regions
Continent | N | Median | Mean Rank | ||
|---|---|---|---|---|---|
ESG Score | Asia | 5994 | 28.300 | 7683.11 | |
Europe | 2722 | 21.700 | 4999.47 | ||
Africa | 141 | 27.000 | 6666.49 | ||
Oceania | 33 | 19.400 | 5815.95 | ||
Australia | 363 | 25.000 | 6366.65 | ||
North America | 4029 | 26.100 | 6709.18 | ||
South America | 307 | 27.000 | 7172.18 | ||
Total | 13,589 | 26.200 | |||
Test statisticsa,b | ESG Score | ||||
Chi-square | 888.743 | ||||
Df | 6 | ||||
Asymp. sig. | 0.000 | ||||
Appendix D: Industry * type of risk crosstabulation
Type of risk | Total | |||||||
|---|---|---|---|---|---|---|---|---|
Negligible risk | Low risk | Medium risk | High risk | Severe risk | ||||
Industry | Aerospace and defense | Count | 0 | 1 | 18 | 42 | 26 | 87 |
% within industry | 0.0% | 1.1% | 20.7% | 48.3% | 29.9% | 100.0% | ||
Autocomponents | Count | 3 | 68 | 117 | 15 | 0 | 203 | |
% within industry | 1.5% | 33.5% | 57.6% | 7.4% | 0.0% | 100.0% | ||
Automobiles | Count | 0 | 15 | 46 | 22 | 0 | 83 | |
% within industry | 0.0% | 18.1% | 55.4% | 26.5% | 0.0% | 100.0% | ||
Banks | Count | 35 | 159 | 402 | 299 | 37 | 932 | |
% within industry | 3.8% | 17.1% | 43.1% | 32.1% | 4.0% | 100.0% | ||
Building products | Count | 1 | 15 | 72 | 33 | 0 | 121 | |
% within industry | 0.8% | 12.4% | 59.5% | 27.3% | 0.0% | 100.0% | ||
Chemicals | Count | 2 | 15 | 168 | 216 | 74 | 475 | |
% within industry | 0.4% | 3.2% | 35.4% | 45.5% | 15.6% | 100.0% | ||
Commercial services | Count | 27 | 135 | 184 | 19 | 0 | 365 | |
% within industry | 7.4% | 37.0% | 50.4% | 5.2% | 0.0% | 100.0% | ||
Construction and engineering | Count | 0 | 7 | 36 | 130 | 112 | 285 | |
% within industry | 0.0% | 2.5% | 12.6% | 45.6% | 39.3% | 100.0% | ||
Construction materials | Count | 0 | 3 | 28 | 54 | 39 | 124 | |
% within industry | 0.0% | 2.4% | 22.6% | 43.5% | 31.5% | 100.0% | ||
Consumer durables | Count | 4 | 111 | 73 | 17 | 0 | 205 | |
% within industry | 2.0% | 54.1% | 35.6% | 8.3% | 0.0% | 100.0% | ||
Consumer services | Count | 0 | 137 | 153 | 104 | 1 | 395 | |
% within industry | 0.0% | 34.7% | 38.7% | 26.3% | 0.3% | 100.0% | ||
Containers and packaging | Count | 1 | 51 | 28 | 0 | 0 | 80 | |
% within industry | 1.3% | 63.8% | 35.0% | 0.0% | 0.0% | 100.0% | ||
Diversified financials | Count | 12 | 150 | 327 | 299 | 2 | 790 | |
% within industry | 1.5% | 19.0% | 41.4% | 37.8% | 0.3% | 100.0% | ||
Diversified metals | Count | 0 | 3 | 24 | 39 | 115 | 181 | |
% within industry | 0.0% | 1.7% | 13.3% | 21.5% | 63.5% | 100.0% | ||
Electrical equipment | Count | 0 | 24 | 118 | 78 | 0 | 220 | |
% within industry | 0.0% | 10.9% | 53.6% | 35.5% | 0.0% | 100.0% | ||
Energy services | Count | 0 | 9 | 46 | 35 | 0 | 90 | |
% within industry | 0.0% | 10.0% | 51.1% | 38.9% | 0.0% | 100.0% | ||
Food products | Count | 0 | 19 | 122 | 195 | 160 | 496 | |
% within industry | 0.0% | 3.8% | 24.6% | 39.3% | 32.3% | 100.0% | ||
Food retailers | Count | 0 | 40 | 109 | 28 | 0 | 177 | |
% within industry | 0.0% | 22.6% | 61.6% | 15.8% | 0.0% | 100.0% | ||
Health care | Count | 0 | 101 | 231 | 185 | 26 | 543 | |
% within industry | 0.0% | 18.6% | 42.5% | 34.1% | 4.8% | 100.0% | ||
Homebuilders | Count | 0 | 31 | 44 | 2 | 0 | 77 | |
% within industry | 0.0% | 40.3% | 57.1% | 2.6% | 0.0% | 100.0% | ||
Household products | Count | 0 | 7 | 41 | 48 | 2 | 98 | |
% within industry | 0.0% | 7.1% | 41.8% | 49.0% | 2.0% | 100.0% | ||
Insurance | Count | 1 | 65 | 143 | 82 | 2 | 293 | |
% within industry | 0.3% | 22.2% | 48.8% | 28.0% | 0.7% | 100.0% | ||
Machinery | Count | 0 | 27 | 153 | 235 | 50 | 465 | |
% within industry | 0.0% | 5.8% | 32.9% | 50.5% | 10.8% | 100.0% | ||
Media | Count | 8 | 184 | 47 | 0 | 0 | 239 | |
% within industry | 3.3% | 77.0% | 19.7% | 0.0% | 0.0% | 100.0% | ||
Paper and forestry | Count | 0 | 17 | 42 | 12 | 0 | 71 | |
% within industry | 0.0% | 23.9% | 59.2% | 16.9% | 0.0% | 100.0% | ||
Pharmaceuticals | Count | 0 | 61 | 290 | 419 | 148 | 918 | |
% within industry | 0.0% | 6.6% | 31.6% | 45.6% | 16.1% | 100.0% | ||
Precious metals | Count | 4 | 3 | 27 | 27 | 41 | 102 | |
% within industry | 3.9% | 2.9% | 26.5% | 26.5% | 40.2% | 100.0% | ||
Real estate | Count | 55 | 551 | 364 | 3 | 0 | 973 | |
% within industry | 5.7% | 56.6% | 37.4% | 0.3% | 0.0% | 100.0% | ||
Refiners and pipelines | Count | 0 | 5 | 50 | 70 | 51 | 176 | |
% within industry | 0.0% | 2.8% | 28.4% | 39.8% | 29.0% | 100.0% | ||
Retailing | Count | 3 | 273 | 135 | 6 | 0 | 417 | |
% within industry | 0.7% | 65.5% | 32.4% | 1.4% | 0.0% | 100.0% | ||
Semiconductors | Count | 0 | 47 | 133 | 81 | 47 | 308 | |
% within industry | 0.0% | 15.3% | 43.2% | 26.3% | 15.3% | 100.0% | ||
Software and services | Count | 8 | 248 | 619 | 35 | 0 | 910 | |
% within industry | 0.9% | 27.3% | 68.0% | 3.8% | 0.0% | 100.0% | ||
Technology hardware | Count | 24 | 265 | 286 | 21 | 0 | 596 | |
% within industry | 4.0% | 44.5% | 48.0% | 3.5% | 0.0% | 100.0% | ||
Telecommunication services | Count | 0 | 32 | 96 | 54 | 3 | 185 | |
% within industry | 0.0% | 17.3% | 51.9% | 29.2% | 1.6% | 100.0% | ||
Traders and distributors | Count | 0 | 25 | 104 | 29 | 0 | 158 | |
% within industry | 0.0% | 15.8% | 65.8% | 18.4% | 0.0% | 100.0% | ||
Transportation | Count | 1 | 77 | 197 | 44 | 5 | 324 | |
% within industry | 0.3% | 23.8% | 60.8% | 13.6% | 1.5% | 100.0% | ||
Transportation infrastructure | Count | 19 | 82 | 42 | 0 | 0 | 143 | |
% within industry | 13.3% | 57.3% | 29.4% | 0.0% | 0.0% | 100.0% | ||
Utilities | Count | 5 | 74 | 189 | 192 | 167 | 627 | |
% within industry | 0.8% | 11.8% | 30.1% | 30.6% | 26.6% | 100.0% | ||
Industrial conglomerates | Count | 0 | 0 | 10 | 32 | 64 | 106 | |
% within industry | 0.0% | 0.0% | 9.4% | 30.2% | 60.4% | 100.0% | ||
Oil and gas producers | Count | 1 | 5 | 14 | 65 | 153 | 238 | |
% within industry | 0.4% | 2.1% | 5.9% | 27.3% | 64.3% | 100.0% | ||
Textiles and apparel | Count | 2 | 122 | 49 | 0 | 0 | 173 | |
% within industry | 1.2% | 70.5% | 28.3% | 0.0% | 0.0% | 100.0% | ||
Steel | Count | 0 | 2 | 7 | 50 | 81 | 140 | |
% within industry | 0.0% | 1.4% | 5.0% | 35.7% | 57.9% | 100.0% | ||
Total | Count | 216 | 3266 | 5384 | 3317 | 1406 | 13,589 | |
% within industry | 1.6% | 24.0% | 39.6% | 24.4% | 10.3% | 100.0% | ||
Appendix E: Overview column pointsa for industry-risk analysis
Risk | Mass | Score in dimension | Inertia | Contribution | |||||
|---|---|---|---|---|---|---|---|---|---|
1 | 2 | Of point to inertia of dimension | Of dimension to inertia of point | ||||||
1 | 2 | 1 | 2 | Total | |||||
Negligible risk | 0.016 | 0.962 | − 0.834 | 0.034 | 0.022 | 0.030 | 0.281 | 0.119 | 0.400 |
Low risk | 0.240 | 0.907 | − 0.610 | 0.169 | 0.302 | 0.242 | 0.764 | 0.195 | 0.959 |
Medium Risk | 0.396 | 0.273 | 0.345 | 0.053 | 0.045 | 0.128 | 0.362 | 0.326 | 0.688 |
High Risk | 0.244 | − 0.673 | 0.584 | 0.117 | 0.169 | 0.226 | 0.618 | 0.262 | 0.881 |
Severe Risk | 0.103 | − 1.711 | − 1.155 | 0.252 | 0.462 | 0.374 | 0.788 | 0.202 | 0.991 |
Active Total | 1.000 | 0.626 | 1.000 | 1.000 | |||||
Appendix F: Overview row pointsa for industry risk analysis
Industry | Mass | Score in dimension | Inertia | Contribution | |||||
|---|---|---|---|---|---|---|---|---|---|
1 | 2 | Of point to inertia of dimension | Of dimension to inertia of point | ||||||
1 | 2 | 1 | 2 | Total | |||||
Aerospace and defense | 0.006 | − 1.174 | 0.004 | 0.006 | 0.013 | 0.000 | 0.975 | 0.000 | 0.975 |
Autocomponents | 0.015 | 0.649 | 0.069 | 0.005 | 0.010 | 0.000 | 0.809 | 0.005 | 0.814 |
Automobiles | 0.006 | 0.209 | 0.639 | 0.001 | 0.000 | 0.007 | 0.143 | 0.758 | 0.901 |
Banks | 0.069 | 0.038 | 0.420 | 0.008 | 0.000 | 0.033 | 0.008 | 0.560 | 0.568 |
Building products | 0.009 | 0.151 | 0.765 | 0.002 | 0.000 | 0.014 | 0.056 | 0.809 | 0.866 |
Chemicals | 0.035 | − 0.677 | 0.502 | 0.014 | 0.024 | 0.024 | 0.745 | 0.231 | 0.976 |
Commercial services | 0.027 | 0.777 | − 0.225 | 0.015 | 0.025 | 0.004 | 0.699 | 0.033 | 0.732 |
Construction and engineering | 0.021 | − 1.408 | − 0.430 | 0.029 | 0.063 | 0.011 | 0.936 | 0.049 | 0.985 |
Construction materials | 0.009 | − 1.141 | − 0.123 | 0.008 | 0.018 | 0.000 | 0.987 | 0.007 | 0.994 |
Consumer durables | 0.015 | 0.841 | − 0.475 | 0.009 | 0.016 | 0.009 | 0.783 | 0.141 | 0.923 |
Consumer services | 0.029 | 0.364 | 0.198 | 0.005 | 0.006 | 0.003 | 0.532 | 0.088 | 0.621 |
Containers and packaging | 0.006 | 1.046 | − 0.755 | 0.006 | 0.010 | 0.009 | 0.710 | 0.208 | 0.918 |
Diversified financials | 0.058 | 0.062 | 0.630 | 0.011 | 0.000 | 0.063 | 0.014 | 0.797 | 0.811 |
Diversified metals | 0.013 | − 1.802 | − 1.551 | 0.042 | 0.066 | 0.087 | 0.678 | 0.283 | 0.961 |
Electrical equipment | 0.016 | 0.010 | 0.883 | 0.005 | 0.000 | 0.034 | 0.000 | 0.989 | 0.990 |
Energy services | 0.007 | − 0.048 | 0.929 | 0.002 | 0.000 | 0.015 | 0.005 | 0.992 | 0.997 |
Food products | 0.037 | − 1.091 | − 0.220 | 0.029 | 0.066 | 0.005 | 0.977 | 0.022 | 1.000 |
Food retailers | 0.013 | 0.407 | 0.453 | 0.004 | 0.003 | 0.007 | 0.398 | 0.278 | 0.676 |
Health care | 0.040 | − 0.040 | 0.480 | 0.004 | 0.000 | 0.025 | 0.011 | 0.864 | 0.875 |
Homebuilders | 0.006 | 0.768 | − 0.090 | 0.003 | 0.005 | 0.000 | 0.772 | 0.006 | 0.778 |
Household products | 0.007 | − 0.283 | 0.985 | 0.003 | 0.001 | 0.019 | 0.117 | 0.796 | 0.913 |
Insurance | 0.022 | 0.210 | 0.504 | 0.003 | 0.001 | 0.015 | 0.225 | 0.731 | 0.957 |
Machinery | 0.034 | − 0.583 | 0.676 | 0.015 | 0.018 | 0.042 | 0.499 | 0.378 | 0.877 |
Media | 0.018 | 1.197 | − 1.165 | 0.029 | 0.038 | 0.065 | 0.574 | 0.306 | 0.880 |
Paper and forestry | 0.005 | 0.404 | 0.425 | 0.001 | 0.001 | 0.003 | 0.448 | 0.279 | 0.727 |
Pharmaceuticals | 0.068 | − 0.666 | 0.404 | 0.025 | 0.046 | 0.030 | 0.776 | 0.160 | 0.936 |
Precious metals | 0.008 | − 1.113 | − 0.729 | 0.008 | 0.014 | 0.011 | 0.721 | 0.174 | 0.895 |
Real estate | 0.072 | 1.019 | − 0.709 | 0.064 | 0.114 | 0.098 | 0.766 | 0.209 | 0.975 |
Refiners and pipelines | 0.013 | − 1.008 | − 0.058 | 0.009 | 0.020 | 0.000 | 0.998 | 0.002 | 1.000 |
Retailing | 0.031 | 1.037 | − 0.773 | 0.032 | 0.050 | 0.050 | 0.669 | 0.210 | 0.879 |
Semiconductors | 0.023 | − 0.278 | 0.090 | 0.002 | 0.003 | 0.001 | 0.665 | 0.040 | 0.705 |
Software and services | 0.067 | 0.634 | 0.227 | 0.033 | 0.041 | 0.009 | 0.539 | 0.039 | 0.578 |
Technology hardware | 0.044 | 0.838 | − 0.322 | 0.022 | 0.047 | 0.012 | 0.901 | 0.075 | 0.975 |
Telecommunication services | 0.014 | 0.113 | 0.611 | 0.002 | 0.000 | 0.014 | 0.054 | 0.884 | 0.938 |
Traders and distributors | 0.012 | 0.304 | 0.645 | 0.004 | 0.002 | 0.013 | 0.181 | 0.457 | 0.638 |
Transportation | 0.024 | 0.407 | 0.336 | 0.006 | 0.006 | 0.007 | 0.440 | 0.168 | 0.608 |
Transportation infrastructure | 0.011 | 1.111 | − 0.974 | 0.018 | 0.020 | 0.027 | 0.477 | 0.206 | 0.683 |
Utilities | 0.046 | − 0.710 | − 0.280 | 0.017 | 0.035 | 0.010 | 0.913 | 0.080 | 0.993 |
Industrial conglomerates | 0.008 | − 1.848 | − 1.323 | 0.023 | 0.041 | 0.037 | 0.766 | 0.221 | 0.987 |
Oil and gas producers | 0.018 | − 1.900 | − 1.569 | 0.058 | 0.096 | 0.117 | 0.714 | 0.274 | 0.988 |
Textiles and apparel | 0.013 | 1.111 | − 0.927 | 0.016 | 0.024 | 0.030 | 0.632 | 0.248 | 0.879 |
Steel | 0.010 | − 1.837 | − 1.222 | 0.028 | 0.053 | 0.042 | 0.800 | 0.199 | 0.999 |
Active total | 1.000 | 0.626 | 1.000 | 1.000 | |||||
Appendix G: Kruskal–Wallis test—to identify the difference between industries
Industry | N | Median | Mean rank | |
|---|---|---|---|---|
ESG Score | Aerospace and defense | 87 | 35.200 | 10,383.40 |
Autocomponents | 203 | 22.900 | 4738.30 | |
Automobiles | 83 | 27.000 | 6574.86 | |
Banks | 932 | 27.900 | 7058.08 | |
Building products | 121 | 27.200 | 6757.70 | |
Chemicals | 475 | 32.200 | 9341.11 | |
Commercial services | 365 | 21.000 | 4139.17 | |
Construction and Engineering | 285 | 37.800 | 10,978.60 | |
Construction materials | 124 | 35.900 | 10,382.38 | |
Consumer durables | 205 | 18.900 | 3867.18 | |
Consumer services | 395 | 25.300 | 5829.55 | |
Containers and packaging | 80 | 17.900 | 2933.55 | |
Diversified financials | 790 | 28.300 | 7069.35 | |
Diversified metals | 181 | 45.000 | 11,525.26 | |
Electrical equipment | 220 | 27.650 | 7329.85 | |
Energy services | 90 | 27.650 | 7440.48 | |
Food products | 496 | 35.800 | 10,122.18 | |
Food retailers | 177 | 24.600 | 5832.73 | |
Health care | 543 | 27.200 | 7205.95 | |
Homebuilders | 77 | 22.300 | 4278.42 | |
Household products | 98 | 30.400 | 8412.11 | |
Insurance | 293 | 26.500 | 6417.90 | |
Machinery | 465 | 31.900 | 8993.15 | |
Media | 239 | 16.800 | 2234.91 | |
Paper and forestry | 71 | 24.500 | 5921.99 | |
Pharmaceuticals | 918 | 32.100 | 9189.01 | |
Precious metals | 102 | 35.400 | 10,070.02 | |
Real estate | 973 | 18.100 | 2940.34 | |
Refiners and pipelines | 176 | 33.800 | 9885.16 | |
Retailing | 417 | 18.200 | 3080.79 | |
Semiconductors | 308 | 27.600 | 7690.30 | |
Software and services | 910 | 23.100 | 4939.88 | |
Technology hardware | 596 | 20.250 | 3869.22 | |
Telecommunication services | 185 | 26.600 | 6822.28 | |
Traders and distributors | 158 | 25.700 | 6297.29 | |
Transportation | 324 | 23.900 | 5751.38 | |
Transportation infrastructure | 143 | 16.400 | 2423.79 | |
Utilities | 627 | 32.600 | 8910.97 | |
Industrial conglomerates | 106 | 41.400 | 11,815.24 | |
Oil and gas producers | 238 | 44.050 | 11,883.43 | |
Textiles and apparel | 173 | 17.400 | 2539.90 | |
Steel | 140 | 42.250 | 11,815.75 | |
Total | 13,589 | 26.200 | ||
Test statisticsa,b | ESG Score | |||
Chi-square | 6093.148 | |||
df | 41 | |||
Asymp. sig. | 0.000 | |||
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Pillai, R., Islam, M.A., Sreejith, S. et al. Comparative analysis of environmental, social and governance (ESG) ratings: do sectors and regions differ?. J Manag Gov (2024). https://doi.org/10.1007/s10997-023-09692-7
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DOI: https://doi.org/10.1007/s10997-023-09692-7