Sustainable Investment and Corporate Governance Working Papers, Sustainable Investment Research Platform
No 2010/9:
Corporate Environmental Performance: Consistency of Metrics and Identification of Drivers
Natalia Semenova ()
Abstract: This study is among the first to provide insight into the
assessment of the convergent validity of widely used environmental
performance ratings. Using a set of environmental dimensions in KLD, GES,
and ASSET4 ratings, this study demonstrates that the different
environmental performance aggregated metrics sufficiently correlate and
provide consistent information when comparing companies. The KLD
environmental concerns measure provides a summary of the environmental
impact of industrial activities in contrast to the KLD measure of strengths
that is a proxy for environmental performance. The observed different
patterns in KLD environmental dimensions suggest that they are distinct
constructs and should not be combined in future research. This study
demonstrates that GES environmental industry risk and KLD concerns are
impact factors that drive corporate environmental performance. Companies in
high impact sectors are on average rated with high environmental
performance. The contribution of this paper is, therefore, a validation of
environmental ratings and a sharper focus upon impact factors that are
associated with high levels of environmental performance. In addition, this
study discusses the implications of findings for advocates and sceptics of
environmental ratings, as well as for academics and practitioners in the
realm of SRI and CSR.
Keywords: Environmental performance; Ratings; Convergent validity; Industry risk; (follow links to similar papers)
39 pages, June 15, 2010
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