Environmental, social, and governance premium in Chinese stock markets

Yinan Ni and Yanfei Sun

Global Finance Journal, 2023, vol. 55, issue C

Abstract: Financial markets have increasingly adopted the concept of ESG (environmental, social, and governance); this paper studies the evolving effect of corporate ESG performance on the stock returns in China's stock markets. Utilizing the Paris Agreement and China's President Xi's pledge to achieve carbon neutrality by 2060 as ESG shocks, we find that firms with lower ESG scores provide higher stock returns after the announcement of the Paris Agreement. Furthermore, the effect of ESG performance heightens after Xi's pledge. Using sorted portfolios and Fama–French factor models, we find that investors are rewarded for bearing ESG-related risks. Our estimated monthly ESG risk premium is between 0.52% and 0.61%, while state-owned firms with larger market capitalizations and better financial and operational performance tend to have better ESG performance.

Keywords: ESG investment; Chinese stock markets; Paris agreement; Portfolio analysis; Carbon neutrality (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 G38 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:55:y:2023:i:c:s1044028323000066

DOI: 10.1016/j.gfj.2023.100811

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