  While environmental, social, and governance (ESG) trading activity has been a
distinctive feature of financial markets, the debate if ESG scores can also
convey information regarding a company's riskiness remains open. Regulatory
authorities, such as the European Banking Authority (EBA), have acknowledged
that ESG factors can contribute to risk. Therefore, it is important to model
such risks and quantify what part of a company's riskiness can be attributed to
the ESG scores. This paper aims to question whether ESG scores can be used to
provide information on (tail) riskiness. By analyzing the (tail) dependence
structure of companies with a range of ESG scores, that is within an ESG rating
class, using high-dimensional vine copula modelling, we are able to show that
risk can also depend on and be directly associated with a specific ESG rating
class. Empirical findings on real-world data show positive not negligible ESG
risks determined by ESG scores, especially during the 2008 crisis.
