Drawing Up the Bill: Are ESG Ratings Related to Stock Returns Around the World?

Romulo Alves, Philipp Krueger and Mathijs A. van Dijk
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Romulo Alves: SKEMA Business School
Philipp Krueger: University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; European Corporate Governance Institute (ECGI); University of Geneva - Geneva School of Economics and Management
Mathijs A. van Dijk: Erasmus University Rotterdam (EUR)

No 25-41, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

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)
Pages: 90 pages
Date: 2025-04
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2541

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