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Monday, January 13, 2020

ESG controversies wipe $500bn off value of US companies

Chris Flood
Originally posted 14 Dec 19

Quarrels involving environmental, social and governance issues (ESG) have wiped more than $500bn off the value of large US companies over the past five years, according to an analysis by Bank of America.

ESG-related risks are becoming increasingly important considerations for institutional investors and asset managers because of mounting fears about climate change, high-profile scams and damaging corporate governance failures.

Bank of America examined the impact on stock prices of companies in the S&P 500 index, the main US equity market benchmark, of 24 controversies related to accounting scandals, data breaches, sexual harassment cases and other ESG issues.

It found these 24 ESG controversies together resulted in peak to trough market value losses of $534bn as the share prices of the companies involved sank relative to the S&P 500 over the following 12 months.

“The hit to market value of an ESG controversy is significant and the impact is long-lasting. It can take a year for a stock to reach a trough following an ESG controversy,” said Savita Subramanian, head of US equity and quantitative strategy at Bank of America. “Negative headlines stick in investors’ minds.”

Bank of America declined to name any of the companies involved in the controversies.

The info is here.