Understanding ESG investing using higher return moments

Tao Shan

Finance Research Letters, 2025, vol. 80, issue C

Abstract: This study explores the link between environmental, social, and governance (ESG) performance and higher return moments (i.e., skewness and kurtosis) addressing a key research gap. It hypothesizes that firms with stronger ESG performance exhibit higher return skewness due to improved market perception and reduced downside risk, as well as lower return kurtosis resulting from better risk management and financial conservatism. Investors accept lower mean returns in ESG firms due to skewness preference and kurtosis aversion, a theory-supported notion. Empirical findings confirm these expectations, clarifying the significance of skewness and kurtosis risk management for ESG investors.

Keywords: Environmental; Social; Governance; ESG; Asset pricing; Return moments; Skewness; Kurtosis (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612325006464
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:80:y:2025:i:c:s1544612325006464

DOI: 10.1016/j.frl.2025.107386

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().