Chapter 2: Measuring CSR, ESG, and Sustainability

We examine the spectrum of sustainability, corporate social responsibility (CSR), and environmental, social, and governance (ESG) databases, highlighting the variety of methodologies for generating ESG scores and their consequences for empirical finance research and investment strategy development. We begin by exploring the conceptual distinctions and overlaps among CSR, ESG, and sustainability initiatives, moving to address the challenges associated with measuring and applying these databases. We present a comparative analysis of these databases, which directly contribute to the discourse on sustainable finance. Furthermore, we acknowledge the prevalent challenges in ESG metric development, such as data availability, comparability issues, and the dynamic nature of ESG factors. Through our review, we find that, although there are efforts toward accurate representation, significant discrepancies exist in the extent to which these databases capture the complexities of CSR, ESG, and sustainability. We uncover a lack of comparability among these databases and the empirical studies leveraging them, which complicates the synthesis of research findings and the development of a coherent investment strategy based on these principles. The study advocates for future research to refine ESG scoring methodologies, improve metrics’ comparability across databases, and foster a more sustainable and responsible investment ecosystem.