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ESG Controversies Result in Stock Underperformance – Clarity AI

ESG-related incidents are more likely to lead to a 2-5% stock underperformance, according to Clarity AI analysis. Assessing over 10,000 controversial incidents for more than 1,500 corporations spanning a four-year period, the global sustainability technology platform noted that investors perceive these controversial incidents as a potential sign of poor management or a lack of ethics. Further, the growing legal and regulatory consequences of ESG-related incidents can be expensive and time-consuming to resolve, the analysis said, as well as reputationally damaging. Borja Cadenato, Director of Product at Clarity AI, said: “Understanding the risks associated with corporate controversies and taking appropriate actions when controversies do occur can help investors build stronger-performing portfolios and help companies react appropriately to minimise market value loss and maintain investor confidence.”  

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