Composite Indicators for Fast-Track Evaluations in ESG Sustainable Finance

The pressing need to successfully integrate non-financial assets (social, environmental) into consolidated economic-financial analysis operations motivates the scientific community in general to seek operational strategies to help with this effort. The broad field of sustainable finance is characterized by increasingly difficult-to-account for Environmental, Social, and Governance (ESG) principles, which are then taken into account in decision-making systems to assess the investment’s impact. Therefore, what operational tool and methodology might be used to prioritize the execution of non-financial valuation processes, particularly in corporate environmental, social, and governance? The purpose of thiswork is to enable rapid risk assessment practices by including environmental, social, and governance (ESG) considerations into investment impact assessment activities. For this purpose, an ESG composite indicator is provided that can be used in multi-scale performance analysis tasks that may be applied to various types of investigation elements. In terms of the random and difficult to measure characteristics, namely which indicators to use and how to measure them, the potential applications and methods of using factor analysis as a methodological framework for creating composite indicators has been researching. The definition of an ESG indicator composite approach is illustrated through a case study of an ESG performance analysis of many market sectors within the Italian manufacturing industry. The next phases of the current research as well as the potentialities of the suggested technique based on the defined ESG composite indicator remain to be appropriately explored.