ESG scores are used for a variety of reasons. "Traditional" ESG scores are not designed to focus on the ESG issues that are relevant to the financial performance of a specific company. Fuel efficiency, for example, has a bigger impact on the bottom line of an airline than it does on an investment bank.

So, rather than adopt a one-size-fits-all approach, Russell Investments has developed a scoring methodology reflecting the materiality of the issues specific to a company and their profitability.

Key research findings

Not all ESG issues are equal

Our research showed <25% of data items in traditional ESG scores were considered material for two thirds of all securities in the Russell Global Large Cap Index universe.

Performance impact

From our initial research we found a significant performance improvement when focusing on stocks that have higher material ESG characteristics.

Practical approach

In our research paper, we provide a practical example of how the material ESG score can have a significant impact on the review of companies' activity.

The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.

Materiality Matters executive summary

 

 

 

 

 

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