We investigated the relationship between corporate environmental, social, and governance (ESG) performance and litigation risk by examining US class action lawsuits. We found that a 1 standard deviation improvement in the ESG controversies of an average company in the sample reduced litigation risk from 3.1% to 2.4%. Moreover, an average company with low ESG performance exhibited a loss in market value twice as large as that of a company with high ESG performance—an abnormal loss of US$1.14 billion. Implementation of our findings with a trading strategy yielded positive monthly alphas, suggesting that investors benefit from lower litigation risk and the insurance-like protection of high ESG performance.

通过研究美国集体诉讼，我们调查了公司环境，社会和治理（ESG）绩效与诉讼风险之间的关系。我们发现样本中一家普通公司的ESG争议改善了1个标准差，将诉讼风险从3.1％降低到2.4％。此外，ESG绩效较低的普通公司的市值损失是ESG绩效较高的公司的两倍，即异常损失11.4亿美元。运用交易策略执行我们的调查结果得出的月度Alpha值呈正数，这表明投资者可从较低的诉讼风险和类似ESG高绩效的保险保护中受益。