The effects of ESG scores on stock performance of US S&P 500 listed firms

Abstract

This thesis investigates the linear relationship between ESG ratings and stock performance of companies of the S&P 500 index between 2010 and 2022. As database for the overall ESG score and the individual environmental, social and governance pillars the independent leading financial data provider Thomson Reuters is used. I use a long short zero investment strategy, by going long on the 20% highest rated and short on the 20%lowest rated companies, to investigate a potential relationship. No abnormal excess returns are observed when examining the regression results for portfolios constructed based on overall ESG scores, indicating a neutral relationship within our time and data sample. However, when analyzing the individual pillars of environmental, social, and governance, slightly negative abnormal returns are statistically significant. These findings indicate a negative linear correlation between the performance of these specific pillars and the financial performance of S&P 500 companies.

Date of Award	28 Jun 2023
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Eva Schliephake (Supervisor)