Exploring the impact of the EU taxonomy on ESG integration and financial performance

: a Nordic perspective

Abstract

This thesis explores the impact of ESG (Environmental, Social, and Governance) integration on company profitability in the Nordic market, renowned for its leadership in sustainability practices. The study analyzes data from companies in Sweden, Finland, and Denmark over a 25-year period to determine the relationship between ESG scores and company profitability metrics, specifically returns on assets and stock prices. It emphasizes the crucial role of standardized reporting frameworks and transparent ESG information in promoting sustainable investments. The research also evaluates the effect of the EU Taxonomy on the correlation between ESG ratings and profitability metrics. Findings reveal a nuanced relationship, with significant correlations primarily observed before the Taxonomy's implementation. These results underscore the complexities and challenges in establishing a direct correlation between ESG performance and profitability. The study suggests that the short timeframe since the Taxonomy's implementation may not have allowed sufficient time for its effects to fully materialize. This research provides valuable insights into sustainable finance, regulatory developments, and responsible investment practices in the Nordic region. By examining long-term data, the thesis contributes to understanding how ESG integration influences financial performance and highlights the importance of robust regulatory frameworks in supporting sustainable investment. The findings are particularly relevant for investors, policymakers, and companies aiming to balance profitability with sustainability, offering a comprehensive view of the Nordic market's unique approach to ESG practices.

Date of Award	25 Jun 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Zoe Venter (Supervisor)