Navigating the Environmental, Social, and Governance (ESG) landscape: constructing a robust and reliable scoring engine - insights into Data Source Selection, Indicator Determination, Weighting and Aggregation Techniques, and Validation Processes for Comprehensive ESG Scoring Systems [version 1; peer review: 3 approved]
This white paper explores the construction of a reliable Environmental, Social, and Governance (ESG) scoring engine, with a focus on the importance of data sources and quality, selection of ESG indicators, weighting and aggregation methodologies, and the necessary validation and benchmarking procedu...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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F1000 Research Ltd
2023-07-01
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| Series: | Open Research Europe |
| Subjects: | |
| Online Access: | https://open-research-europe.ec.europa.eu/articles/3-119/v1 |
| _version_ | 1797660771666100224 |
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| author | Lennart Baals Branka Hadji Misheva Yiting Liu Nicole Koenigstein Joerg Osterrieder |
| author_facet | Lennart Baals Branka Hadji Misheva Yiting Liu Nicole Koenigstein Joerg Osterrieder |
| author_sort | Lennart Baals |
| collection | DOAJ |
| description | This white paper explores the construction of a reliable Environmental, Social, and Governance (ESG) scoring engine, with a focus on the importance of data sources and quality, selection of ESG indicators, weighting and aggregation methodologies, and the necessary validation and benchmarking procedures. The current challenges in ESG scoring and the importance of a robust ESG scoring system are addressed, citing its increasing relevance to stakeholders. Furthermore, different data types, namely self-reported data, third-party data, and alternative data, are critically evaluated for their respective merits and limitations. The paper further elucidates the complexities and implications involved in the choice of ESG indicators, illustrating the trade-offs between standardized and customized approaches. Various weighting methodologies including equal weighting, factor weighting, and multi-criteria decision analysis are dissected. The paper culminates in outlining processes for validating the ESG scoring engine, emphasizing the correlation with financial performance, and conducting robustness and sensitivity analyses. Practical examples through case studies exemplify the implementation of the discussed techniques. The white paper aims to provide insights and guidelines for practitioners, academics, and policy makers in designing and implementing robust ESG scoring systems. |
| first_indexed | 2024-03-11T18:35:44Z |
| format | Article |
| id | doaj.art-49035012fdd241e5b01925bd119e4697 |
| institution | Directory Open Access Journal |
| issn | 2732-5121 |
| language | English |
| last_indexed | 2024-03-11T18:35:44Z |
| publishDate | 2023-07-01 |
| publisher | F1000 Research Ltd |
| record_format | Article |
| series | Open Research Europe |
| spelling | doaj.art-49035012fdd241e5b01925bd119e46972023-10-13T00:00:00ZengF1000 Research LtdOpen Research Europe2732-51212023-07-01317573Navigating the Environmental, Social, and Governance (ESG) landscape: constructing a robust and reliable scoring engine - insights into Data Source Selection, Indicator Determination, Weighting and Aggregation Techniques, and Validation Processes for Comprehensive ESG Scoring Systems [version 1; peer review: 3 approved]Lennart Baals0Branka Hadji Misheva1Yiting Liu2https://orcid.org/0009-0006-9554-8205Nicole Koenigstein3Joerg Osterrieder4https://orcid.org/0000-0003-0189-8636Institution of Applied Data Science and Finance, Bern University of Applied Sciences, Bern Business School, Bern, Bern, 3005, SwitzerlandInstitution of Applied Data Science and Finance, Bern University of Applied Sciences, Bern Business School, Bern, Bern, 3005, SwitzerlandInstitution of Applied Data Science and Finance, Bern University of Applied Sciences, Bern Business School, Bern, Bern, 3005, SwitzerlandNectar Digital Wealth AG, Zürich, Zürich, 8005, SwitzerlandInstitution of Applied Data Science and Finance, Bern University of Applied Sciences, Bern Business School, Bern, Bern, 3005, SwitzerlandThis white paper explores the construction of a reliable Environmental, Social, and Governance (ESG) scoring engine, with a focus on the importance of data sources and quality, selection of ESG indicators, weighting and aggregation methodologies, and the necessary validation and benchmarking procedures. The current challenges in ESG scoring and the importance of a robust ESG scoring system are addressed, citing its increasing relevance to stakeholders. Furthermore, different data types, namely self-reported data, third-party data, and alternative data, are critically evaluated for their respective merits and limitations. The paper further elucidates the complexities and implications involved in the choice of ESG indicators, illustrating the trade-offs between standardized and customized approaches. Various weighting methodologies including equal weighting, factor weighting, and multi-criteria decision analysis are dissected. The paper culminates in outlining processes for validating the ESG scoring engine, emphasizing the correlation with financial performance, and conducting robustness and sensitivity analyses. Practical examples through case studies exemplify the implementation of the discussed techniques. The white paper aims to provide insights and guidelines for practitioners, academics, and policy makers in designing and implementing robust ESG scoring systems.https://open-research-europe.ec.europa.eu/articles/3-119/v1Environmental Social and Governance (ESG); ESG Scoring Engine; ESG Indicator Selection; Weighting Methodologies; Validationeng |
| spellingShingle | Lennart Baals Branka Hadji Misheva Yiting Liu Nicole Koenigstein Joerg Osterrieder Navigating the Environmental, Social, and Governance (ESG) landscape: constructing a robust and reliable scoring engine - insights into Data Source Selection, Indicator Determination, Weighting and Aggregation Techniques, and Validation Processes for Comprehensive ESG Scoring Systems [version 1; peer review: 3 approved] Open Research Europe Environmental Social and Governance (ESG); ESG Scoring Engine; ESG Indicator Selection; Weighting Methodologies; Validation eng |
| title | Navigating the Environmental, Social, and Governance (ESG) landscape: constructing a robust and reliable scoring engine - insights into Data Source Selection, Indicator Determination, Weighting and Aggregation Techniques, and Validation Processes for Comprehensive ESG Scoring Systems [version 1; peer review: 3 approved] |
| title_full | Navigating the Environmental, Social, and Governance (ESG) landscape: constructing a robust and reliable scoring engine - insights into Data Source Selection, Indicator Determination, Weighting and Aggregation Techniques, and Validation Processes for Comprehensive ESG Scoring Systems [version 1; peer review: 3 approved] |
| title_fullStr | Navigating the Environmental, Social, and Governance (ESG) landscape: constructing a robust and reliable scoring engine - insights into Data Source Selection, Indicator Determination, Weighting and Aggregation Techniques, and Validation Processes for Comprehensive ESG Scoring Systems [version 1; peer review: 3 approved] |
| title_full_unstemmed | Navigating the Environmental, Social, and Governance (ESG) landscape: constructing a robust and reliable scoring engine - insights into Data Source Selection, Indicator Determination, Weighting and Aggregation Techniques, and Validation Processes for Comprehensive ESG Scoring Systems [version 1; peer review: 3 approved] |
| title_short | Navigating the Environmental, Social, and Governance (ESG) landscape: constructing a robust and reliable scoring engine - insights into Data Source Selection, Indicator Determination, Weighting and Aggregation Techniques, and Validation Processes for Comprehensive ESG Scoring Systems [version 1; peer review: 3 approved] |
| title_sort | navigating the environmental social and governance esg landscape constructing a robust and reliable scoring engine insights into data source selection indicator determination weighting and aggregation techniques and validation processes for comprehensive esg scoring systems version 1 peer review 3 approved |
| topic | Environmental Social and Governance (ESG); ESG Scoring Engine; ESG Indicator Selection; Weighting Methodologies; Validation eng |
| url | https://open-research-europe.ec.europa.eu/articles/3-119/v1 |
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