Sustainability Matters : Company SDG Scores Need Not Have Size, Location, and ESG Disclosure Biases

He, Lewei and Lohre, Harald and van Zanten, Jan Anton (2025) Sustainability Matters : Company SDG Scores Need Not Have Size, Location, and ESG Disclosure Biases. Journal of ESG Impact and Investing, 6 (1). pp. 83-95.

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Abstract

This article examines potential biases in SDG scores, which assess companies’ alignment with the 17 UN Sustainable Development Goals. Known biases in ESG (environmental, social, and governance) ratings—such as size, location, and disclosure effects—raise concerns about their reliability in measuring corporate sustainability and informing sustainable investing strategies. Conversely, the authors find a slight negative correlation between company size and SDG scores, though this is economically insignificant. Firms in emerging markets exhibit marginally higher SDG alignment compared to those in developed markets, indicating an absence of location bias. These findings remain robust when accounting for a company’s capacity to disclose ESG data. The authors’ results imply that SDG-aligned investment portfolios can avoid biases commonly associated with sustainability ratings. Furthermore, they challenge the notion that company size, location, or disclosure resources are primary drivers of corporate sustainability performance.