Drawing up the bill: Are ESG ratings related to stock returns around the world?

Rómulo Alves, Philipp Krüger and Mathijs van Dijk

Journal of Corporate Finance, 2025, vol. 93, issue C

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.

Keywords: ESG investing; Environmental, Social & Governance; Global stock returns; ESG uncertainty; Country characteristics (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:93:y:2025:i:c:s0929119925000367

DOI: 10.1016/j.jcorpfin.2025.102768

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