Research on SASB
Research Based on SASB
Russell Investments, Materiality matters: Targeting the ESG issues that can impact performance. Russell Investments mapped SASB’s Materiality Map® general issue categories to Sustainalytics subcategories to adapt the Sustainalytics company ESG scores by calculating a new Material ESG score based on what SASB identifies for a company based on its SICS® industry. Using the new Material ESG score to analyze companies from 2011 to 2017, they find evidence that the Material ESG scores are better predictors of return compared to the original score, even after adjusting for known drivers of equity returns (such as factor exposures).
Mozaffar Khan, George Serafeim and Aaron Yoon, Corporate Sustainability: First Evidence on Materiality (Harvard Business School, March 9, 2015). The authors mapped SASB’s Materiality Map® general issue categories to MSCI KLD data for 2,307 unique firms over 13,397 unique firm-years across six SICS® sectors. Using both calendar-time portfolio stock return regressions and firm-level panel regressions they find that firms with good ratings on SASB’s material sustainability issues significantly outperform firms with poor ratings on these issues. In contrast, firms with good ratings on immaterial sustainability issues (ESG issues not identified by SASB for a given industry) do not significantly outperform firms with poor ratings on the same issues. Lastly, they find that all else equal firms scoring at the top quintile on the material issues have higher future return-on-sales growth.
BlackRock, Sustainable investing: a ‘why not’ moment: environmental, social and governance investing insights. BlackRock applied SASB’s Sustainable Industry Classification System® (SICS®) to the Russell 1000 Index and compared the results to the General Industry Classification System (GICS) across eight years of data. They found that (a) pairwise correlations between sectoral returns were lower than GICS and (b) pairwise correlations of excess returns of individual stocks within sectors were comparable to that of GICS.
QMA, Integration ESG in Portfolio Construction: An innovative data lens gives a wider view on sustainable investing. QMA mapped SASB’s Materiality Map® general issue categories to Bloomberg ESG data from 2008 through 2015 for the Russell 3000 and S&P 500. After categorizing companies as good, bad, or neutral, they provide evidence that analyzing companies using only SASB’s material ESG factors is preferable to analyzing companies based on all disclosed ESG information. Additionally, they used a procedure borrowed from pairs trading to assign companies to good or bad categories even if those companies weren’t disclosing much ESG information, which allowed them to expand the number of companies categorized as good or bad by over 200%.