The impact of ESG risks on corporate value

Gil Cohen ()
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Gil Cohen: Western Galilee Academic College

Review of Quantitative Finance and Accounting, 2023, vol. 60, issue 4, No 6, 1468 pages

Abstract: Abstract The following research has analyzed the linkage between ESG sustainability scores to the firm’s valuations. We provide evidence that the total ESG score is diminishing for the S & P500 firms from 2019 till 2021 meaning that these risks factors take their rightful place in the global economy. We find that the impact of environmental risks on the firm’s valuation is not significant enough. Moreover, we found that while the “Beta” risk factor of the S & P500 carries environmental risks, it does not hold such risks for Nasdaq100 stocks, and therefore, we recommend strengthening the environmental education to investors and other financial industry participants. This research also provides evidence that social risk impact negatively the simple excess return for both the S & P500 and nasdaq100 stocks indicating that social issues must be mitigated in order to maximize a firm value. Moreover, we find that the traditional CAPM “Beta” carries environmental and corporate governance risks for the S & P500 stocks. However, it totally neglects social risks and therefore it can not be used in modern ages where social risk are very important to all participants of the global economic environment.

Keywords: NASDAQ; ETF; Systematic risk; Solar energy; Wind energy; Beta (search for similar items in EconPapers)
JEL-codes: O16 O35 P43 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (10)

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DOI: 10.1007/s11156-023-01135-6

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