Environmental, Social, and Governance (ESG) Analytics Lab
ESG Analytics Lab
Within the last five years, the share of total global assets under management actively weighting Environmental, Social and Governance (ESG) factors has doubled (to $30.7 Trillion or 39% of total AUM) as has the share of executives, board members, and investment managers who consider ESG issues to be material. At the same time, however, the confidence of executives, board members, and investment managers in the data available to evaluate the materiality of ESG factors has halved. ESG scores across proprietary data providers have been demonstrated to be unreliable and often lean on outdated information around relevant ESG factors—others omit pertinent factors in their scoring altogether.
The ESG Analytics Lab seeks to solve these problems by leveraging Wharton’s demonstrated expertise in analytics. We focus on developing high-quality, replicable academic research and pedagogy resulting in insights that can help current and future investors, asset managers and other ESG integrators make informed decisions.
Walking the Talk:
Valuing a Multi-Stakeholder Strategy
A new study, published by FCLTGlobal and the ESG Analytics Lab, analyzes the annual reports of over 3,000 global companies (drawn from MSCI’s All Country World Index) to look for stakeholder-oriented language, and compares the presence of that language with financial, environmental, social and governance (ESG) outcomes.
The data shows that if all the companies in the study performed like the top tercile, they would have generated a collective $2.9 trillion in additional firm value between 2010-2020.
ESG in Action
The ESG Analytics Lab supports high-quality, replicable academic research on ESG integration using alternative data sources as well as producing novel pedagogy showcasing best practices among asset managers. We also partner with students and seek to influence practice and policy.
Conducting academically rigorous and practically relevant research on ESG integration.
In three published papers and two working papers, Witold Henisz, Sinziana Dorobantu and Lite Nartey demonstrate the materiality of stakeholder engagement for 19 publicly traded gold mining companies, show that positive stakeholder sentiment is particularly valuable during a crisis, and analyze different strategies for earning and maintaining stakeholder support.
⇒ Read Gold Mining Research Papers
- Witold Henisz, Sinziana Dorobantu, Lite Nartey (2014), Spinning Gold: The Financial and Operational Returns to External Stakeholder
Engagement, Strategic Management Journal, 35 (12), pp. 1727-1748. 10.1002/smj.2180
- Sinziana Dorobantu, Witold Henisz, Lite Nartey (2017), Not All Sparks Light a Fire: Stakeholder and Shareholder Reactions to Critical Events in Contested Markets, Administrative Science Quarterly, 62 (3), pp. 561-597.
- Lite Nartey, Witold Henisz, Sinziana Dorobantu (2018), Status Climbing Versus Bridging: Multinational Stakeholder Engagement Strategies, Strategy Science, 3 (2), pp. 367-392.
- Lite Nartey, Sinziana Dorobantu, Witold Henisz, A Participatory Approach to Stakeholder Engagement: Defining a Hierarchy of Strategic Action.
- Sinziana Dorobantu, Witold Henisz, Lite Nartey, Proactive Stakeholder Engagement and Stakeholder Preferences for Firm Investments.
- Benjamin Keys and Philip Mulder assess the impact of climate change on the price of low lying real estate in Florida
- Carolyn Deller and Chris Ittner analyze the link between enterprise risk management, governance and ESG performance
- Aymeric Bellon analyzes the environmental impact of private equity ownership
⇒ More ESG Research
- Professor Claudine Gartenberg analyzes the financial impact of corporate purpose as well as its determinants. She also studies the determinants of pay inequality among employees within and between firms as well as the role of social comparisons in limiting such inequality.
- Katarzyna Odziemkowska and Witold Henisz demonstrate that managerial choices regarding their firms’ performance on ESG are a function of national societal pressure on these issues as measured by media content analysis
- Odziemkowska, Katarzyna and Witold J. Henisz, (2020) “Web of Influence:
National Stakeholder Networks and Corporate Social Performance” Organization Science Forthcoming.
- Odziemkowska, Katarzyna and Witold J. Henisz, (2020) “Web of Influence:
- Sarah Light and Steven Kimbrough are using computational text analysis of corporate disclosure documents to help justify a more rigorous standard for mandatory audited ESG disclosure.
- Aline Gatignon studies ESG implementation among Indian firms after a government mandate and in cross-sector collaborations in emerging markets.
- James McGlinch and Witold Henisz are integrating value-based strategy and stakeholder theory in a paper that maps ESG impacts onto intermediate accounting outcomes highlighting the differential materiality across industries and time based on structural characteristics as well as shifting stakeholder salience.
- Chris Bruno and Witold Henisz in partnership with ESG Analytics Lab Corporate Research Sponsor the Calvert Institute are analyzing the materiality of ESG factors for municipal finance.
- Kevin Chuah, James McGlinch and Witold Henisz are analyzing the determinants of inflows into ESG oriented mutual funds and ETFs and helping to expose the rampant greenwash (i.e., false claims regarding ESG integration) characterizing many of the offerings in this rapidly growing investment domain.
- Witold Henisz is working to augment existing ESG metrics focused largely on voluntary corporate reporting and/or media-reported stakeholder sentiment to more tangible and science-based outcomes of relevance to stakeholders. This work highlights the financial materiality of a firms’ negative externalities imposed on stakeholders for shareholders in the future through distinct stakeholder pathways whose strength varies by industry and stakeholder salience.
- Tony He is analyzing the strategic response of consumer product companies to ESG scandals impacting competitors’ products.
- James McGlinch is analyzing the role of ESG for firms in financial distress including analysis of the likelihood they enter into reorganizations, the type of reorganization (i.e., Chapter 7, Chapter 11 or private reorganization) as well as the outcome of that reorganization and the firms’ subsequent economic performance.
- Maria Gelrud and Jessica Wachter analyze the impact of climate risk for asset pricing
Expanding the scope of ESG data available to scholars affiliated with the Lab beyond the suite available through Wharton Research Data Services (e.g., MSCI-KLD, Sustainalytics, RepRisk, Ravenpack).
For access to these datasets, please contact firstname.lastname@example.org.
Developing pedagogy to bring the practical challenge of ESG integration into the classroom.
We are partnering with
- Parnassus Investments,
- Alliance Bernstein,
- Record Currency Management,
- Atlas Impact Partners and
to showcase best practices in ESG integration across different asset classes and investment strategies. Enroll in Wharton’s online specialization in ESG offered via Coursera with Wharton Professors Witold Henisz, Sarah Light, Mae McDonnell, and Chris Geczy. Register Now >>
Partnering with students to support and develop their ESG integration skills through competitions, career expos, speakers, networking events and other initiatives.
Influencing practice and policy via industry-facing publications, speaking events and policymaking debates
- Sustainability Accounting Standards Board 5th Annual Symposium, November 30-December 1, 2020
- TruValue Labs ESG Investing Forums
- UN PRI Academic Week October 2020
- Global Research Alliance for Sustainable Finance and Investment 3rd Annual Conference, September 8-11, 2020
- Wellcertified Webinar on Investing for Health
- CFA Institute 6thAnnual Sustainable Investing Conference, November 15, 2019
- BSR Conference, November 12-14, 2019 San Jose CA
- Aspen Institute Art of the Corporate Investor-ESG Conversation, December 11-12, 2018, New York City
Research independently cited in five comments to DOL ESG Rulemaking process
- Letter of Janine Guillot, CEO Sustainability Accounting Standards Board
- Letter of Institute for Policy Integrity and Environmental Defense Fund
- Letter of Keith Johnson, Co-Chair Institutional Investor Service Group
- Letter of John Lukomnik, Managing Partner, Sinclair Capital
- Letter of Fran Seegul, Executive Director, US Impact Investing Alliance
The COVID crisis has further emphasized the inequalities between different professions, classes, racial groups, and nationalities. Witold J. Henisz, Deloitte & Touche Professor of Management and founder of the Wharton ESG Analytics Lab joined Dean Erika James to discuss how the industry can minimize harm and be a positive force in addressing these challenges.
Why Diversity, Wage Inequality, and Workers Rights Deserve Our Attention
In the News
Stay up to date on ESG Analytics at the Wharton School.
- Coverage of Engine No 1’s Total Value Framework co-developed by Professor Witold Henisz
- Exclusive-Engine No. 1 investment framework aims to tie company valuations to climate impact; Reuters, September 13, 2021
- Engine No. 1 Unveils ESG Framework to Scrutinize Investments; Bloomberg, September 13, 2021
- Engine No. 1 Unveils Its Total Value Framework, Which Ties ESG Impacts Directly to Financial Value Creation; Business Wire, September 13, 2021
- Is Your Home Value At Risk From Climate Change? Recent Research Finds A Link; Forbes, August 30, 2021
- Corporate Diplomacy: Connecting Profits and Purpose; Aspen Institute, August 2, 2021
- Corporate Taxes Increasingly Seen as Social Obligation; Talking Tax by Bloomberg Tax, August 2, 2021
- Professor Rachelle C. Sampson is the winner of the Panmure House Prize; Adam Smith Panmure House, August 2021
- Why Engine No. 1’s Victory Is a Wake-up Call for ExxonMobil and Others; Knowledge@Wharton, June 15, 2021
- The Next Move: Rethinking Fair Pay; Aspen Institute, October 29, 2020
- Aspen Institute Honors Business Teaching on the Forefront of Inclusive Capitalism in 2020; Aspen Institute, September 30, 2020
- Overnight Energy: House Passes Sweeping Clean Energy Bill; The Hill, September 24, 2020
- Corporations Roll Out Climate Goals Amid Growing Pressure to Deliver; The Hill, September 24, 2020
- The Next Move: Rethinking Fair Pay; Aspen Institute, October 29, 2020
- Where ESG Fails; Institutional Investor, October 16, 2019
- 181 Top CEOs Have Realized Companies Need a Purpose Beyond Profit; Harvard Business Review, August 20, 2019
- It Turns Out That Middle Managers Are The Key To Improved Stock Market Performance; Forbes, April 24, 2019
- Make Every Employee A Chief Purpose Officer; Forbes, April 24, 2017
- The Type of Purpose That Makes Companies More Profitable; Harvard Business Review, October 21, 2016
- Has Corporate Activism Turned a Corner? Brink News, July 19, 2020
- Resilience In Crisis: Coronavirus Reveals Why Businesses Must Do Good To Do Well; Forbes, June 8, 2020
- First the pandemic hit them. Now retailers and restaurants have to rebuild after protests; CNBC, June 1, 2020
- Responsible Investing is Going Mainstream – Why You Should Care; ETF Trends, May 15, 2020
- Walmart CEO Doug McMillon took bold stances in 2019. Next year he’ll have an even bigger platform; CNBC, December 30, 2019
- Truvalue Labs (TM) Hosts Deep Dive into Actionable ESG Trends During Latest Investing Forum; Yahoo Finance, December 4, 2019
- AI-Derived ESG Signals Enhance Returns; ETF Stream, December 2, 2019
- PRI’s Nuzzo: More work needed around credit ratings reflecting ESG; ETF Stream, October 15, 2019
- The NBA’s Foul in China Is a Fresh Lesson in Foreign Political Risk; Wall Street Journal, October 11, 2019
- For the N.B.A., a Sticky Situation in China Will Linger; New York Times, October 9, 2019
- Blizzard Suspends ‘Hearthstone’ ESports Ahlete After his Pro-Hong Kong Plea on Livestream; USA Today, October 8, 2019
- Opinion: NBA commissioner Adam Silver at Center of China Controversy and has no Winning Play; USA Today, October 7, 2019
- A New Way to Teach Management; Forbes, January 23, 2019
- J&J Slammed by Concern Over Baby Powder Safety; Wall Street Journal, December 17, 2018
- We’re Not Done With DAPL: How Investors Can Still Support Indigenous Rights; Forbes, November 1, 2018
- Why Companies Must Manage Environmental, Social and Governance Risks; Knowledge@Wharton, October 17, 2018
- New Balance, Under Armour, and the Year that Sneakers Got Political; GQ, December 22, 2017
- Uber is the Latest U.S. Tech Company to Face Regulatory Backlash in Europe; Los Angeles Times, November 10, 2017
- Fast Food Workers Rally for Higher Wages; USA Today, May 15, 2014
- What’s the Tech Industry’s Place in a Racial Justice Movement? Engadget, August 19, 2020
- Currency Trader Touts Green Credentials While Founder Questions Climate Science; Bloomberg, August 14, 2020
- ‘Social Movements Are Contagious’: Protests Within Mass. Companies Are Part Of A Growing Trend; WBUR, August 4, 2020
- Corporate Activism Gets Its Day. Ben & Jerry’s Has Been at It for Decades; Wall Street Journal, June 5, 2020
- Silicon Valley Talks About Racism, But When Will They Act? Inside Hook, June 4, 2020
- Tech Companies Denounce Racism. Will Silicon Valley Change? Wired, June 1, 2020
- Why Amazon, Facebook, Disney Saw Their Chiefs Retake Control; Yahoo, May 11, 2020
- ‘US Grocery Store Workers Need to Be Fairly Compensated.’ Protests at Amazon, Whole Foods Begin. USA Today, March 31, 2020
- Hollywood Invested Big in Georgia. A New Abortion Law Is Causing Some Tensions; New York Times, May 23, 2019
- People Are Getting Tired of Being Told to Boycott Nike and Other Favorite Brands; Quartz, September 7, 2018
- Travel and Hotel Companies Break Ties to the NRA Amid Anger Over Florida School Shooting; Los Angeles Times, February 24, 2018
A New Way of Seeing Value: Introducing the Engine No. 1 Total Value Framework
Investors shouldn’t have to choose between a portfolio’s long-term financial return and its positive global impact. Enter: The Engine No. 1 Total Value Framework, which directly ties environmental, social, and governance impacts to financial value creation.
Co-authored by Witold J. Henisz, Deloitte & Touche Professor of Management and founder of the Wharton ESG Analytics Lab, this white paper takes a data-driven approach that integrates non-traditional but financially material ESG data, methods, and systems into traditional analysis.
Corporate Partnership Program
The ESG Lab connects corporate partners with our four pillars of work
Nimble and Accurate ESG Valuation
Comprehensive, Transparent and Objective Rankings
Thought Partnership for Innovative Research
Building a Talent Pipeline of Future ESG Leaders