ABSTRACT Using SASB’s materiality framework, prior research finds alpha for the portfolio of firms with improving ratings on material ESG issues. We replicate this finding and provide a fundamentals-based perspective on why the materiality portfolio outperforms. Our basic premise is that changes in material ESG issues reflect fundamental firm characteristics. More financially established firms—firms with larger size, lower growth, and higher profitability relative to their sector—are more likely to not only create material strengths but also resolve material weaknesses in their ESG scoring. This fundamental link dictates that one should comprehensively control for fundamental determinants of stock returns before attributing portfolio outperformance to improving material ESG scores. Indeed, we find that the materiality portfolio does not generate alpha after we account for its exposure to profitability and growth factors. Our evidence underscores the issue of correlated omitted fundamental factors in the debate of ESG alpha. Data Availability: Data are available from the sources cited in the text. JEL Classifications: G11; G12; G14; M14; M41; Q51.

中文翻译：

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Material ESG Alpha：基于基本面的视角


摘要利用 SASB 的重要性框架，先前的研究发现，在重大 ESG 问题上评级提高的公司投资组合具有阿尔法效应。我们复制了这一发现，并提供了基于基本面的观点来解释重要性投资组合为何表现出色。我们的基本前提是，重大 ESG 问题的变化反映了公司的基本特征。财务状况较好的公司（相对于其所在行业而言，规模较大、增长较低且盈利能力较高的公司）不仅更有可能创造物质优势，而且更有可能解决其 ESG 评分中的物质弱点。这一基本联系表明，在将投资组合的优异表现归因于实质性 ESG 分数的提高之前，人们应该全面控制股票回报的基本决定因素。事实上，我们发现，在考虑了重要性投资组合的盈利能力和增长因素之后，它并没有产生阿尔法。我们的证据强调了 ESG alpha 争论中相关遗漏基本因素的问题。数据可用性：数据可从文中引用的来源获得。 JEL 分类：G11； G12； G14； M14； M41； Q51.