The authors of a landmark 2014 ESG study have issued another clarification following accusations that the methodology used in their research was flawed.
In a recent comment published in the Journal of Management Scientific Reports (JOMSR), high-profile sustainable finance scholars Robert Eccles, Ioannis Ioannou and George Serafeim acknowledged that their paper, The impact of corporate sustainability on organisational processes and performance, had misdescribed a key element of the research.
The study, commonly known as EIS 2014, claims to show that companies with high ESG scores demonstrate better financial performance than those with lower scores.
It has played a pivotal role in the sustainable investment landscape, and has been widely cited by financial institutions and regulators – including the US Securities and Exchange Commission – as evidence of the business case for pursuing sustainability.
Doubts about the credibility of the research first emerged after Andrew King, a professor of strategy and innovation at Boston University’s Questrom School of Business, re-examined the paper and raised a number of concerns.
The authors issued two corrections last year.
They confirmed the word ‘not’ had been omitted from one of their conclusions: it should have stated that, for some portfolios in the analysis, the difference in performance was “not significant”.
They also acknowledged a coding error that, when corrected, showed the high-sustainability portfolio outperformed the low by 4.4%, not 4.8%, as originally claimed.
But King also claims to have found it impossible to legitimately match the 90 ‘sustainable’ companies in the original study with credible ‘non-sustainable’ ones, in order to prove it was sustainability that was driving the outperformance.
In their latest comment in JOMSR, Eccles, Ioannou and Serafeim accepted that their paper contained ambiguities about the matching process, and that the approach was not the same as that described in one of the study’s footnotes.
“The inclusion of Footnote 7 in the published paper perhaps should have explained this in more detail to avoid the impression that it described the actual matching process of the main analysis,” the statement read.
However, they insisted, the issue was a matter of miscommunication rather than substantive inaccuracy, and that the ultimate findings still stand.
In response, King said: “Words matter – especially in a paper of extraordinary influence such as EIS 2014.”
“Scholars have a duty to write with precision, to say what they mean, and to correct the record when their published descriptions mislead.”
He has also claimed that the latest clarification confirms that the paper’s methodology could not support causal claims about the relationship between sustainability and financial performance.
“With this new correction, the article’s causal claims collapse, and all its estimates become ambiguous,” he said.
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