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

Author

Listed:
  • Romulo Alves

    (SKEMA Business School)

  • 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)

  • Mathijs A. van Dijk

    (Erasmus University Rotterdam (EUR))

Abstract

We 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 between 2001 and 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.

Suggested Citation

  • Romulo Alves & Philipp Krueger & Mathijs A. van Dijk, 2025. "Drawing Up the Bill: Are ESG Ratings Related to Stock Returns Around the World?," Swiss Finance Institute Research Paper Series 25-41, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2541
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4674146
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    More about this item

    Keywords

    ESG investing; Environmental; Social & Governance; Global stock returns; ESG uncertainty; Country characteristics;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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