The ESG Initiative at the Wharton School
Conducting rigorous and practically relevant research that investigates the interaction between ESG factors and business, offering actionable solutions for leaders.


Featured ESG Research

When Non-Materiality is Material: Impact of ESG Emphasis on Firm Value

In recent years, environmental, social, and governance (ESG) factors have emerged as a controversial topic among various firm stakeholders. Increasingly, top executives face a dilemma: How can they address investor demand for emphasizing ESG when studies often show no incremental returns to ESG investing? Wharton professor Serguei Netessine and co-authors Sonam Singh, Ashwin V. Malshe, and Yakov Bart propose a conceptual framework to examine the impacts of emphasizing nonmaterial and material ESG factors on firm value.

Do Consumers Care About ESG? Evidence from Barcode-Level Sales Data

Using granular barcode-level sales data from retail stores, Wharton professor Jean-Marie Meier and co-authors Henri Servaes, Jiaying Wei, and Steven Chong Xiao show that environmental and social (E&S) ratings are positively related to local sales, especially in counties with more Democratic-leaning and higher-income households. The study provides direct evidence that E&S activities affect consumer demand–the cash flow channel of ESG.

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, Vice Dean and Faculty Director of the ESG Initiative, this white paper takes a data-driven approach that integrates non-traditional but financially material ESG data, methods, and systems into traditional analysis.

Determinants of Portfolio ESG Performance: An Attribution Framework

A new study, published in the Journal of Portfolio Management, shows how a portfolio’s ESG performance can be attributed to both underlying firms’ ESG performance and the portfolio weighting strategy of the portfolio manager. When applied to the portfolios of U.S. public pensions, James J. Li, the author and Wharton doctoral student, shows that pensions’ positive average ESG performance over the last decade is mainly due to their underlying holdings improving their ESG scores over this period and not from portfolio weight changes.

How Municipal ESG Performance Can Signal Lower Credit Costs

A July 2023 working paper sponsored by Calvert and conducted by Witold J. Henisz and Christopher C. Bruno at the Wharton ESG Initiative, titled “Environmental, Social, and Governance Factors and Municipal Bond Yields,” finds that better ESG performance by municipalities can be associated with reduced credit risk. Additionally, the research suggests that good ESG policies linked to community ESG performance outcomes can provide long-term benefits to business growth, migration, and the tax base, while possibly reducing racial inequities.

Retail Investors and ESG News

A new study co-authored by Christina Zhu, Assistant Professor of Accounting at the Wharton School, shows that retail investors care about firms’ ESG-related activities, but only to the extent they are financially material for company performance. They focus on news-relevant events, showing that ESG news appears to be an important component of retail investors’ portfolio allocation decisions. 

Walking the Talk: Valuing a Multi-Stakeholder Strategy

A new study, published by FCLTGlobal and ESG-I, analyzes the annual reports of over 3,000 global companies to look for stakeholder-oriented language, and compares the presence of that language with financial, environmental, social, and governance 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.

Where Do Brown Companies Borrow From?

Using a structural model of credit risk, Wharton doctoral students Sergey Sarkisyan and Irina Luneva show that for low-ESG-rated firms, it is less expensive to borrow from banks than from public market compared to high-ESG-rated firms. They conclude that both loan and bond markets offer higher costs of debt to brown firms, but the bond market’s “punishment” is higher than the loan market’s.

Featured Environmental Research

Banks and Climate Governance

Major banks in the United States and globally have begun to assert an active role in the transition to a low-carbon economy and the reduction of climate risk through private environmental and climate governance. This Essay by Sarah E. Light, Associate Professor of Legal Studies & Business Ethics and her coauthor, Christina P. Skinner, situates these actions within historical and economic contexts: It explains how the legal foundations of banks’ sense of social purpose intersect with their economic incentives to finance major structural transitions in society. In doing so, this Essay sheds light on the reasons why we can expect banks to be at the center of this contemporary transition.

Formative Experiences and the Price of Gasoline

Gas prices continue to climb, surpassing $6/gallon in some U.S. states. For today’s teenage drivers, the reverberations of these price shocks will be felt for years to come. According to a new study by Chris Severen, a senior economist at the Federal Reserve Bank of Philadelphia, and Arthur van Benthem, Wharton professor of business economics and public policy, oil crises during your formative years shape driving behavior later in life.

Inclusive Insurance for Climate-Related Disasters

Low- to moderate-income households and communities of color are disproportionally affected by climate disasters and more likely to experience financial shocks but do not have financial savings, or insurance, to cover them according to a new report by Carolyn Kousky, Associate Vice President for Economics and Policy at the Environmental Defense Fund, and Karina French, Climate Resilience Research Manager at the Environmental Defense Fund, both formerly of the Wharton Risk Center – now Wharton Climate Center. The report provides actionable guidance for federal, state, and local leaders, as well as insurers, to expand the financial protection of insurance those whose needs are not currently met by the market and make disaster insurance more affordable, accessible, transparent, people-centered, and just.

Featured Social Research

Catalytic Capital in Impact Investing: Forms, Features, and Functions

The Impact Finance Research Consortium (IFRC) has released a detailed report shedding new light on the features and applications of catalytic capital, investments bearing a high level of risk or accepting lower returns to stimulate positive social and environmental outcomes that would likely not be possible otherwise. The IFRC is a collaboration of faculty and staff at the ESG Initiative at the Wharton School, Harvard Business School, and the University of Chicago Booth School of Business to advance research on impact investing.

Does Employing Skilled Immigrants Enhance Competitive Performance? Evidence from European Football Clubs

Using detailed microdata from European football (soccer) clubs during 1990-2020, Wharton Professors Exequiel (Zeke) Hernandez and Britta Glennon investigate the effect of hiring skilled immigrant employees on the performance of organizations.

Emerging Trends in Institutional Social Responsibility

This report reveals widespread adoption of CSR and ESG practices among a diverse range of large U.S. for-profit and nonprofit organizations, though with critical gaps remaining in areas such as environmental responsibility and diversity, equity and inclusion. The report demonstrates that the path ahead is filled with complex obstacles but also immense potential for corporate innovation and positive impact.

Geostrategy in Practice

An EY survey of global executives reveals how to improve political risk management — an urgent imperative amid the COVID-19 crisis.

Great Expectations: Mission Preservation and Financial Performance in Impact Investing

Given the pressure to find liquidity, general partners may face tradeoffs between maximizing financial returns and ensuring the preservation of portfolio companies’ missions. This research evaluates the interplay of liquidity and mission preservation in impact investing using survey data from 53 impact investing private equity funds from around the world.

Socially Responsible Investing in Good and Bad Times

Co-authored by Amir Yaron of The Wharton School, this article investigates the time variability of abnormal returns from socially responsible investing (SRI) and finds that highly rated SRI stocks outperform lowly rated SRI stocks during good economic times, but underperform during bad times, such as recessions.

The People Factor: How Investing in Employees Pays Off

New research from FCLTGlobal, CPP Investments Insights Institute, and the ESG Initiative at the Wharton School shows there can be a payoff for employers that back up employee-centric talk with investments in their workforce, but it requires a thoughtful approach that includes effective communication to investors and multiple investment levers.

Featured Governance Research

CPA-Guide to Corporate Political Spending

Prepared by The Center for Political Accountability in collaboration with senior executives at companies that are CPA-Zicklin Index Trendsetters, the purpose of the Guide is to help safeguard companies as they make political spending decisions in today’s charged environment. It lays out the risks and challenges that management and boards face in establishing political spending policies, making spending decisions, conducting due diligence, and meeting the expectations of stakeholders.

CPA-Zicklin Index of Corporate Political Disclosure and Accountability

The CPA-Zicklin Index of Corporate Political Disclosure and Accountability depicts a strong and growing trend among S&P 500 companies that are placing restrictions on political spending, devising clear policies to govern such spending, and enhancing board oversight of public company engagement in the political process.

When Are Organizations Punished for Organizational Misconduct? A Review and Research Agenda

Wharton Professors Mary-Hunter “Mae” McDonnell and Samir Nurmohamed review sociological and macro-organizational work that suggests punitive severity can vary with three key attributes of the organization: status, reputation, and embedded ties.

Zicklin Bright Index

The Zicklin Bright Index (ZBI) is a ranking established in 2023 that seeks to classify companies demonstrating notable human rights awareness into tiers. Researchers evaluate corporations in a specific region based on their publicly available information, self-disclosure, and gross revenue. Importantly, the ZBI does not measure direct human rights performance but rather emphasizes transparency and disclosure practices as fundamental social goods.

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