ESG and Financial Performance: Aggregated Evidence from More than 2000 Empirical Studies

Journal of Sustainable Finance & Investment, Volume 5, Issue 4, p. 210-233, 2015, DOI: 10.1080/20430795.2015.1118917

25 Pages Posted: 19 Dec 2015  

Gunnar Friede

Deutsche Asset & Wealth Management

Timo Busch

University of Hamburg

Alexander Bassen

University of Hamburg; University of Reading - ICMA Centre

Date Written: October 22, 2015

Abstract

The search for a relation between environmental, social, and governance (ESG) criteria and corporate financial performance (CFP) can be traced back to the beginning of the 1970s. Scholars and investors have published more than 2,000 empirical studies and several review studies on this relation since then. The largest previous review study analyzes just a fraction of existing primary studies, making findings difficult to generalize. Thus, knowledge on the financial effects of ESG criteria remains fragmented. To overcome this shortcoming, this study extracts all provided primary and secondary data of previous academic review studies. Through doing this, the study combines the findings of about 2,200 individual studies. Hence, this study is by far the most exhaustive overview of academic research on this topic and allows for generalizable statements. The results show that the business case for ESG investing is empirically very well-founded. Roughly 90% of studies find a non-negative ESG-CFP relation. More importantly, the large majority of studies reports positive findings. We highlight that the positive ESG impact on CFP appears stable over time. Promising results are obtained when differentiating for portfolio and non-portfolio studies, regions, and young asset classes for ESG investing such as emerging markets, corporate bonds, and green real estate.

Keywords: ESG, corporate social performance, financial performance, business case, second-order meta-analysis

JEL Classification: A13, G10, G15, G23, L10, L21, M14, O16, P12, P17, Q20

Suggested Citation

Friede, Gunnar and Busch, Timo and Bassen, Alexander, ESG and Financial Performance: Aggregated Evidence from More than 2000 Empirical Studies (October 22, 2015). Journal of Sustainable Finance & Investment, Volume 5, Issue 4, p. 210-233, 2015, DOI: 10.1080/20430795.2015.1118917. Available at SSRN: https://ssrn.com/abstract=2699610

Gunnar Friede

Deutsche Asset & Wealth Management ( email )

Mainzer Landstr. 11-17
Frankfurt, 60329
Germany

Timo Busch (Contact Author)

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

Alexander Bassen

University of Hamburg ( email )

Von-Melle-Park 5
20146 Hamburg
Germany

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

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