Are material sustainability issues material?

Abstract

With the materiality classification presented by SASB, materiality-adjusted ESG scores were recalibrated based on a sample of South Korea firms within the 2010-2018 period. As it is common practice in the return predictability literature, top and bottom portfolios were sorted regarding the orthogonalization of changes in materiality-adjusted scores to changes in firm characteristics. Mixed results suggest whether there is significant relevance between the performance of materiality-adjusted scores and future stock returns, except one portfolio having a significant alpha.