Circular Economy Impact Analysis on Stock Performances: An Empirical Comparison with the Euro Stoxx 50 ® ESG Index

Donato Morea, Fabiomassimo Mango, Mavie Cardi, Cosimo Paccione and Lucilla Bittucci
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Donato Morea: Department of Mechanical, Chemical and Materials Engineering, University of Cagliari, Via Marengo, 2, 09123 Cagliari, Italy
Fabiomassimo Mango: Department of Management, Sapienza University, Via del Castro Laurenziano, 9, 00161 Rome, Italy
Mavie Cardi: Department for Research, Link Campus University, Via del Casale di San Pio V, 44, 00165 Rome, Italy
Cosimo Paccione: Department of Management, Sapienza University, Via del Castro Laurenziano, 9, 00161 Rome, Italy
Lucilla Bittucci: Department of Management, Sapienza University, Via del Castro Laurenziano, 9, 00161 Rome, Italy

Sustainability, 2022, vol. 14, issue 2, 1-20

Abstract: Environmental issues have a considerable impact in all economic sectors, also influencing financial markets. As a result, environmental, social, and governance (ESG) awareness is rising in the financial sector. In this perspective, the concept of circular economy (CE) assumes central relevance. The aim of our study is to investigate the relationship between CE strategies and market performance; to this end, we use ESG scores as a proxy for CE. Our initial assumption is that since CE is a component of the “E” factor—in that it can generate positive and measurable environmental impacts—then it can be associated with the ESG score. Therefore, we can methodologically overcome the lack of a specific score related to CE. We use a preselection model based on historical performance by verifying the percentages of the presence of stocks in the two selected indices, namely ESG Euro Stoxx 50 ® and Euro Stoxx 50-ESG. Overall, we find that ESG profiles have a positive impact on stock performance, although ESG scores do not express higher performance per se. Furthermore, our analysis shows that, to date, there is no evidence that CE initiatives can influence stock returns.

Keywords: circular economy; environmental; social and governance (ESG); portfolio analysis; financial markets (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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