Environmental, Social, Governance scores and the Missing pillar—Why does missing information matter?

Environmental, Social, and Governance (ESG) scores measure companies' perfor- mance concerning sustainability and are organized in three pillars: Environmental, Social, and Governance. These complementary non-financial ESG scores should pro- vide information about companies' ESG performance and risks. However, the extent of not yet published ESG information makes the reliability of ESG scores question- able. To explicitly capture the not yet published information on ESG category scores, a new pillar, the so-called Missing (M) pillar, is proposed and added to the new defini- tion of the Environmental, Social, Governance, and Missing (ESGM) scores. By relying on the data provided by Refinitiv, we show that the ESGM scores strengthen the companies' risk relationship. These new scores could benefit investors and practi- tioners as ESG exclusion strategies using only ESG scores might exclude assets with a low score solely because of their missing information and not necessarily because of a low ESG merit.