Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/285370 
Year of Publication: 
2023
Series/Report no.: 
CFS Working Paper Series No. 708
Publisher: 
Goethe University Frankfurt, Center for Financial Studies (CFS), Frankfurt a. M.
Abstract: 
We examine whether the uncertainty related to environmental, social, and governance (ESG) regulation developments is reflected in asset prices. We proxy the sensitivity of firms to ESG regulation uncertainty by the disparity across the components of their ESG ratings. Firms with high ESG disparity have a higher option-implied cost of protection against downside tail risk. The impact of the misalignment across the different dimensions of the ESG score is distinct from that of ESG score level itself. Aggregate downside risk bears a negative price for firms with low ESG disparity.
Subjects: 
ESG
rating
downside risk
options
regulation
risk premium
JEL: 
G12
G18
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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