V2I10P55

Shielding Investors from Downside Risk: The Role of ESG Scores in Mitigating Systematic Risk

Dr. Abdul Haleem Quraishi^1*, Dr. Latha A², Kavya  S M³

Abstract

This study examines how Environmental, Social, and Governance (ESG) scores contribute to mitigating systematic and downside risk for investors. With growing market volatility, climate challenges, and global uncertainties, ESG has evolved from an ethical choice into a measurable determinant of corporate resilience and investor protection. Using a cross-sectional sample of 150 publicly listed firms across six sectors, the study employs regression and correlation analyses to evaluate the relationship between ESG performance and market-related risk metrics such as beta, Value-at-Risk (VaR), and Conditional Value-at-Risk (CVaR). Results indicate that higher ESG scores are significantly associated with lower beta values and reduced downside deviation, suggesting that firms with strong ESG practices are better insulated from market shocks. Although ESG is not the sole determinant of risk mitigation, it serves as a vital component in creating stable and sustainable portfolios. The findings underscore the strategic importance of integrating ESG considerations into investment frameworks to enhance both financial performance and long-term resilience.

Keywords:

ESG Scores, Systematic Risk, Downside Risk, Sustainable Investment, Portfolio Resilience.