ESG Scores Predict Stock Performance in the Technology Sector

Jinglin Pei ()
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Jinglin Pei: Durham University

A chapter in Proceedings of the 2025 International Conference on Hybrid Commerce, Human Capital, and Economic Dynamics (ICHCH 2025), 2026, pp 203-212 from Springer

Abstract: Abstract Recently, Environmental, Social, and Governance (ESG) has become increasingly important in investment decisions. As a result, many investors are questioning whether ESG scores can help predict stock performance, especially in the technology sector. This study investigates whether ESG scores can enhance short-term return prediction for technology firms by using Bloomberg data from 2020 to 2025. This study applied Extreme Gradient Boosting (XGBoost) and Random Forest models to predict 20-day returns by combining ESG data with technical indicators. The results showed weak predictive performance with low accuracy and negative R2 values. Ordinary Least Squares (OLS) regression revealed some significant ESG components, but their effects were inconsistent. Shapley Additive Explanations (SHAP) analysis confirmed ESG features had minimal impact compared to past return data. These findings suggest that traditional ESG scores may lack short-term predictive value. Future research should explore sentiment-based ESG measures, avoid inconsistency between different rating agencies, and improve model design to capture more meaningful insights.

Keywords: ESG scores; Stock return prediction; Technology sector (search for similar items in EconPapers)
Date: 2026
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DOI: 10.2991/978-2-38476-585-0_24

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