Drawing Up the Bill: Are ESG Ratings Related to Stock Returns Around the World?

59 Pages Posted: 23 Mar 2024

See all articles by Philipp Krueger

Philipp Krueger

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; European Corporate Governance Institute (ECGI); University of Geneva - Geneva School of Economics and Management

Romulo Alves

SKEMA Business School

Mathijs A. van Dijk

Erasmus University Rotterdam (EUR)

Multiple version iconThere are 2 versions of this paper

Abstract

We aim to provide the most comprehensive analysis to date of the relation between ESG ratings and stock returns, using 16,000+ stocks in 48 countries and seven different ESG rating providers. We find very little evidence that ESG ratings are related to global stock returns over 2001-2020. This finding obtains across different regions, time periods, ESG (sub)ratings, ESG momentum, ESG downgrades and upgrades, and best-in-class strategies. We further find little empirical support for prominent hypotheses from the literature on the role of ESG uncertainty and of country-level ESG social norms, ESG disclosure standards, and ESG regulations in shaping the relation between ESG and global stock returns. Overall, our results suggest that ESG investing did not systematically affect investment performance during the past two decades.

Keywords: ESG investing, ESG, Environmental, Social & Governance, Global stock returns, ESG uncertainty, Country characteristics

Suggested Citation

Krueger, Philipp and Alves, Rómulo and van Dijk, Mathijs A., Drawing Up the Bill: Are ESG Ratings Related to Stock Returns Around the World?. Available at SSRN: https://ssrn.com/abstract=4770546 or http://dx.doi.org/10.2139/ssrn.4770546

Philipp Krueger (Contact Author)

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

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Geneva 4, Geneva 1211
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Swiss Finance Institute ( email )

Switzerland

European Corporate Governance Institute (ECGI) ( email )

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Belgium

University of Geneva - Geneva School of Economics and Management ( email )

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Bd du Pont-d'Arve 40
Geneva, 1211
Switzerland

Rómulo Alves

SKEMA Business School ( email )

Paris
France

Mathijs A. Van Dijk

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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