Environmental Impact and Stock Returns
(2020) NEKN01 20201Department of Economics
- Abstract
- Objective: The objective of this study is to examine whether more environmentally sustainable stocks exhibit higher risk-adjusted returns than less sustainable stocks.
Method: The question is examined through two-sided significance tests, comparing daily Sharpe ratios for pairwise portfolios consisting of the top and the bottom quantiles of companies as ranked by several sustainability metrics. These tests are performed both within sectors, and over all sectors, for 2110 global stocks in the years 2006 to 2019.
Results: The results show significant support of the more sustainable companies exhibiting higher risk-adjusted returns in many of the tests performed, especially in sectors with the largest environmental impact by the metrics... (More) - Objective: The objective of this study is to examine whether more environmentally sustainable stocks exhibit higher risk-adjusted returns than less sustainable stocks.
Method: The question is examined through two-sided significance tests, comparing daily Sharpe ratios for pairwise portfolios consisting of the top and the bottom quantiles of companies as ranked by several sustainability metrics. These tests are performed both within sectors, and over all sectors, for 2110 global stocks in the years 2006 to 2019.
Results: The results show significant support of the more sustainable companies exhibiting higher risk-adjusted returns in many of the tests performed, especially in sectors with the largest environmental impact by the metrics used. On the other hand, there are some noteworthy differences between the companies that do report and the companies that do not report sustainability metrics.
Conclusions: While the results show support of the more sustainable companies outperforming the less sustainable, there are some limitations to the generalisation of the results. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9030430
- author
- Örnberg, Frej LU
- supervisor
-
- Dag Rydorff LU
- organization
- course
- NEKN01 20201
- year
- 2020
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Sustainability, ESG, Sharpe ratios, Portfolios, Stocks
- language
- English
- id
- 9030430
- date added to LUP
- 2020-12-07 10:50:15
- date last changed
- 2020-12-07 10:50:15
@misc{9030430,
abstract = {{Objective: The objective of this study is to examine whether more environmentally sustainable stocks exhibit higher risk-adjusted returns than less sustainable stocks.
Method: The question is examined through two-sided significance tests, comparing daily Sharpe ratios for pairwise portfolios consisting of the top and the bottom quantiles of companies as ranked by several sustainability metrics. These tests are performed both within sectors, and over all sectors, for 2110 global stocks in the years 2006 to 2019.
Results: The results show significant support of the more sustainable companies exhibiting higher risk-adjusted returns in many of the tests performed, especially in sectors with the largest environmental impact by the metrics used. On the other hand, there are some noteworthy differences between the companies that do report and the companies that do not report sustainability metrics.
Conclusions: While the results show support of the more sustainable companies outperforming the less sustainable, there are some limitations to the generalisation of the results.}},
author = {{Örnberg, Frej}},
language = {{eng}},
note = {{Student Paper}},
title = {{Environmental Impact and Stock Returns}},
year = {{2020}},
}