Unpacking the 'S' in ESG: sectoral dynamics of social performance and weighting on ESG outcomes in the S&P 500

Abstract

This thesis critically investigates how the weighting and performance of social initiatives influence overall ESG improvements among S&P 500 companies, examining significant sectoral variations. With the increasing prominence of the social dimension in ESG frameworks, understanding how effectively social metrics are integrated into broader ESG strategies is vital. Utilizing a comprehensive dataset covering 2015-2022, this study employs descriptive analysis, trend analysis, correlation testing, ANOVA, and linear mixed-effects regression model to quantify the relationship between social scores, their assigned weightings, and overall ESG outcomes. Findings reveal a positive relationship between social performance and overall ESG scores, particularly pronounced in sectors such as health care and consumer discretionary. Conversely, sectors like real estate exhibit weaker correlations, indicating varied strategic emphases on social initiatives. Critically, the research identifies that while higher weighting of social criteria alone negatively impacts ESG scores, combining high social performance with significant weighting substantially amplifies ESG outcomes. These insights highlight crucial implications for investors, policymakers, and corporate leaders, advocating for differentiated, sector-specific ESG frameworks to effectively capture and promote genuine social performance.