ESG and Equity Performance in Private Market, Primary Market, and Secondary Market
The Journal of Alternative Investments Summer 2024, 27 (1) 28 - 49
Posted: 7 Aug 2023 Last revised: 13 Apr 2024
Date Written: April 2, 2024
Abstract
The role of ESG characteristic in equity performance at both firm-level and sector-level is investigated. We provide a wide range of analysis that covers private, primary, and secondary markets. A comprehensive dataset is constructed to link three markets. Non-green equity outperforms green equity in both private and secondary markets; in primary market the non-green IPOs are issued at a discount relative to green IPOs. The analysis shows that green(non-green) equity is relatively overvalued(undervalued) at IPO. Sector-level ESG information dominates firm-level ESG information in explaining the outperformance of non-green firms in both private and secondary markets. Valuation/Change in Cash multiple at IPO verifies the higher valuation of green equity relative to that of non-green equity. ESG characteristic of PE firms, when being evaluated at IPO, is conditional on healthy financial fundamentals of PE firms.
Keywords: ESG, IPO, Private Equity, Impact Investing, Primary Market
JEL Classification: C58, C55, E22, D53, G12, G32
Suggested Citation: Suggested Citation