Higher ESG ratings correlate with better investment returns: Reports
News from Web 16-Sep-2023
New Delhi: Companies with higher ESG (Environmental, Social, and Governance) ratings generally experienced better investment returns than those with lower ratings, according to a study by global risk and financial advisory provider Kroll.The comprehensive ESG and Global Investor Returns Study analyzed data on more than 13,000 publicly traded companies across various industries worldwide.
The numbers name
Key findings from the study revealed that ESG Leaders globally earned an average annual return of 12.9 per cent compared to an average of 8.6 per cent by companies lagging in ESG metrics. This represents about a 50 per cent premium in relative performance by companies rated higher on the ESG scale.
Asian and Indian companies in focus
Similar trends were observed in Asia, where companies with higher ESG ratings showed a stronger annual average return during 2013-2021.However, only 6 per cent of Asia companies were considered ESG Leaders as of December 2021, while 38 per cent were rated as ESG Laggards.
Indian companies followed suit.ESG Leaders in India exhibited an average annual return of 15.1 per cent, almost double the 7.8 per cent annual return for the Laggards.. Aviral Jain, Managing Director, Valuation Advisory Services, India, Kroll, noted, "Investors have given a thumbs-up to ESG Leader companies in India, with their average annual returns crossing 15 per cent."
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