Deconstructing ESG Scores May Unlock Value, and May Impact Shariah-Compliant Investments Differently

A working paper from the Bank for International Settlements (BIS) finds value in separating E, S and G compared with an aggregate Environmental, Social, and Governance (ESG) score for investors trying to minimise performance deviation from a benchmarkSeparating ESG into E, S and G allows investors increase their investments' relevant ESG score without incurring a financial cost to their returnsA simple analysis of RFI Foundation’s research on ESG and Shariah screening suggests the Islamic funds should consider how they apply deconstructed ESG data within a Shariah screened universe

A working paper published by the BIS looks into the impact of disaggregating ESG scores on investors’ ability to increase the ESG quality of their investments without sacrificing returns....