Corporate sustainability and stock returns: evidence from a global dataset

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School of Business | Bachelor's thesis
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Date

2016

Department

Rahoituksen laitos

Major/Subject

Mcode

Degree programme

Rahoitus

Language

en

Pages

26

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Abstract

This paper analyzes the relationship between corporate sustainability and long-run stock returns. A value-weighted portfolio of the “Global 100 Most Sustainable Corporations in the World” lost an annual four-factor alpha of -4.3 percent from 2005 to 2016. The results are robust to controlling for different weighting methodologies, asset pricing models, comparing to industry-adjusted benchmarks, and geographical differences. These findings suggest overvaluation of environmental, social, and governance (ESG) factors by the market, exhibited in the globally highest percentile of sustainable firms in their respective industries. For investors, these findings suggest using aggregate ESG ratings-based socially responsible investing (SRI) screens may dent their investment returns.

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Thesis advisor

Lof, Matthijs

Keywords

sustainable, investing, socially, responsible, corporate, sustainability

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https://urn.fi/URN:NBN:fi:aalto-201708176550

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[kand] Kauppakorkeakoulu / BIZ (Open Access)