Impact of ESG on financial performance on the most capitalized stock markets
: evidence from the USA Europe and Asia

  • José Nuno Martins de Jesus Machado Caldeira (Student)

Student thesis: Master's Thesis


This paper analyzes the relationship between the corporate Environmental, Social, and Governance(ESG) score and stock returns. Contrary to previous literature, this study covers two recent timeframes, 2010-2018 and 2015-2018, in three different regions: USA, Europe, and Asia. To predicteach ESG pillar's effect on excess stock returns, a regression model was used. This paper finds anegative impact of the Environmental score on excess returns on the US, a positive impact of theSocial score on the US and Asia and a positive impact of the ESG score on stock returns in Asia.Additionally, resourcing to a portfolio construction method, this paper shows evidence that portfolioscontaining the top ESG score stocks can outperform those containing the bottom ones. Between 2010and 2018, there was evidence that a portfolio that buys (shorts) the best (worst) Governance scoreachieved positive abnormal returns in Europe. In the 2015-2018 period, in the USA and Europe, aportfolio that buys (shorts) the best (worst) ESG score stocks achieved positive abnormal returns. InAsia, there was no evidence of positive abnormal returns. Although the relationship between ESGand stock returns will depend heavily on the time frame and region, this paper showed clear benefitsin adopting a socially responsible investment approach. Furthermore, an ethical dilemma arises whereinvestors must acknowledge that the returns obtained by a less socially responsible portfolio withstocks linked with the production/distribution of tobacco, alcohol, firearms, and fuels lead to higherreturns comparing to ESG rich portfolios.
Date of Award25 Jan 2021
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorEva Schliephake (Supervisor)


  • ESG
  • Socially responsible investment
  • Corporate sustainability
  • Financial performance


  • Mestrado em Economia

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