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Circular Economy Impact Analysis on Stock Performances: An Empirical Comparison with the Euro Stoxx 50 ® ESG Index

Author

Listed:
  • Donato Morea

    (Department of Mechanical, Chemical and Materials Engineering, University of Cagliari, Via Marengo, 2, 09123 Cagliari, Italy)

  • Fabiomassimo Mango

    (Department of Management, Sapienza University, Via del Castro Laurenziano, 9, 00161 Rome, Italy)

  • Mavie Cardi

    (Department for Research, Link Campus University, Via del Casale di San Pio V, 44, 00165 Rome, Italy)

  • Cosimo Paccione

    (Department of Management, Sapienza University, Via del Castro Laurenziano, 9, 00161 Rome, Italy)

  • Lucilla Bittucci

    (Department of Management, Sapienza University, Via del Castro Laurenziano, 9, 00161 Rome, Italy)

Abstract

Environmental issues have a considerable impact in all economic sectors, also influencing financial markets. As a result, environmental, social, and governance (ESG) awareness is rising in the financial sector. In this perspective, the concept of circular economy (CE) assumes central relevance. The aim of our study is to investigate the relationship between CE strategies and market performance; to this end, we use ESG scores as a proxy for CE. Our initial assumption is that since CE is a component of the “E” factor—in that it can generate positive and measurable environmental impacts—then it can be associated with the ESG score. Therefore, we can methodologically overcome the lack of a specific score related to CE. We use a preselection model based on historical performance by verifying the percentages of the presence of stocks in the two selected indices, namely ESG Euro Stoxx 50 ® and Euro Stoxx 50-ESG. Overall, we find that ESG profiles have a positive impact on stock performance, although ESG scores do not express higher performance per se. Furthermore, our analysis shows that, to date, there is no evidence that CE initiatives can influence stock returns.

Suggested Citation

  • Donato Morea & Fabiomassimo Mango & Mavie Cardi & Cosimo Paccione & Lucilla Bittucci, 2022. "Circular Economy Impact Analysis on Stock Performances: An Empirical Comparison with the Euro Stoxx 50 ® ESG Index," Sustainability, MDPI, vol. 14(2), pages 1-20, January.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:2:p:843-:d:723120
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    References listed on IDEAS

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    1. Alan Murray & Keith Skene & Kathryn Haynes, 2017. "The Circular Economy: An Interdisciplinary Exploration of the Concept and Application in a Global Context," Journal of Business Ethics, Springer, vol. 140(3), pages 369-380, February.
    2. Kirchherr, Julian & Reike, Denise & Hekkert, Marko, 2017. "Conceptualizing the circular economy: An analysis of 114 definitions," Resources, Conservation & Recycling, Elsevier, vol. 127(C), pages 221-232.
    3. Korhonen, Jouni & Honkasalo, Antero & Seppälä, Jyri, 2018. "Circular Economy: The Concept and its Limitations," Ecological Economics, Elsevier, vol. 143(C), pages 37-46.
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    1. Cappa, Francesco & Collevecchio, Francesca & Oriani, Raffaele & Peruffo, Enzo, 2022. "Banks responding to the digital surge through Open Innovation: Stock market performance effects of M&As with fintech firms," Journal of Economics and Business, Elsevier, vol. 121(C).
    2. Jihye Yun & Jonghwa Lee, 2022. "Analysis of the Relationship between Corporate CSR Investment and Business Performance Using ESG Index—The Use-Case of Korean Companies," Sustainability, MDPI, vol. 14(5), pages 1-14, March.

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