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Does the ESG Index Affect Stock Return? Evidence from the Eurostoxx50

Author

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  • Mario La Torre

    (Department of Management, Sapienza University of Rome, 00161 Rome, Italy)

  • Fabiomassimo Mango

    (Department of Management, Sapienza University of Rome, 00161 Rome, Italy)

  • Arturo Cafaro

    (Department of Management, Sapienza University of Rome, 00161 Rome, Italy)

  • Sabrina Leo

    (Department of Management, Sapienza University of Rome, 00161 Rome, Italy)

Abstract

Recent findings provide evidence that companies highly rated in terms of Environmental, Social, and Governance (ESG) score report higher excess returns and lower volatility, this being supported by the assumption that ESG factors are considered, by market agents, as a good proxy for firms’ financial soundness. The aim of this paper is to investigate how ESG components affect stock returns. We use a two-step methodology to analyze the performance of companies included in the Eurostoxx50 index over the 2010–2018 period according to their ESG score. To classify companies in terms of ESG commitments, we combine several ESG indicators (quantitative ratings, scorings and qualitative-opinions) collected on a monthly basis. Our results do not support previous evidence; the Eurostoxx50 companies’ performance does not seem to be affected by their efforts in terms of ESG commitments.

Suggested Citation

  • Mario La Torre & Fabiomassimo Mango & Arturo Cafaro & Sabrina Leo, 2020. "Does the ESG Index Affect Stock Return? Evidence from the Eurostoxx50," Sustainability, MDPI, vol. 12(16), pages 1-12, August.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:16:p:6387-:d:396179
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    References listed on IDEAS

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