The Independent Effects of Environmental, Social and Governance Initiatives on the Performance of UK Firms

33 Pages Posted: 23 Aug 2010  

Jacquelyn Humphrey

University of Queensland - Business School

Darren D. Lee

University of Queensland - Business School

Yaokan Shen

University of Queensland - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: August 22, 2010

Abstract

We investigate the effect of environmental, social and governance factors on the financial performance of a sample UK firms. We examine the three factors separately in order to disentangle the relation of each with financial performance. We find that, overall, there is no difference in the performance of firms which achieve high or low environmental, social or governance rankings. Additionally, high and low ranking firms do not appear very different in terms of their systematic risks, book-to-market ratios or momentum exposures. However, high-rated firms are consistently larger in size. Our results indicate that UK investors are free to incorporate environmental, social or governance information into their investment strategies without incurring any significant financial cost (or benefit) in terms of risk or return.

Keywords: Sustainability, Environment, Social, Governance, Corporate social performance, Corporate financial performance, UK evidence, Best of sector.

JEL Classification: G30, G11, Q56

Suggested Citation

Humphrey, Jacquelyn and Lee, Darren D. and Shen, Yaokan, The Independent Effects of Environmental, Social and Governance Initiatives on the Performance of UK Firms (August 22, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1663444 or http://dx.doi.org/10.2139/ssrn.1663444

Jacquelyn Humphrey (Contact Author)

University of Queensland - Business School ( email )

4072 Brisbane Queensland
Australia

Darren David Lee

University of Queensland - Business School ( email )

4072 Brisbane, Queensland
Australia

Yaokan Shen

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

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