ESG Performances of Energy Companies in OECD Countries: A Clustering Approach

Examining the Environmental, Social, and Governance (ESG) aspects of the organizations is one of the current concerns related to sustainable investment decisions. Energy markets are one of the key areas where ESG concepts are applied due to their dynamism, scale, and effect. Noting that the ESG framework is very appropriate for use of multi-criteria decision methodologies to rank the alternatives, the current research is motivated by the idea that clustering can also serve as a tool to evaluate ESG performance. Accordingly, we propose clustering as a tool for ESG analysis for OECD energy companies that enables us to identify the conflicting areas on ESG performance while avoiding potential controversies, the requirement for predefined information, or subjectivity in aggregation. The k-means clustering algorithm is used to analyze a data set of 231 energy organizations under the three ESG pillars of Environmental, Social, and Governance. We identify the patterns across the clusters that may signify high and low performance in each pillar and discuss the properties of prominent clusters in terms of business classifications and country of headquarters.