Environmental, social and governance scores in Europe: what drives financial performance for larger firms?

Tiago Cruz Gonçalves, Victor Barros and José Vicente Avelar
Authors registered in the RePEc Author Service: Tiago Cruz Gonçalves ()

Economics and Business Letters, 2023, vol. 12, issue 2, 121-131

Abstract: This paper aims to investigate the association between firms’ financial performance and their sustainability performance, as measured by Tobin's Q, with a focus on the individual ESG pillars. Our study analyzes constituents of the Stoxx Europe 600 index. We employ different econometric approaches and perform a comprehensive analysis of the post-2015 agreement concerning climate change. Results suggest a statistically positive relationship between firms’ ESG and financial performance, although of greater magnitude for the social component. Overall, our findings highlight the superior relevance of social performance in yielding shareholder value for the largest European firms.

Date: 2023
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