ESG Performance in European Financials, Industrials, and Healthcare Sectors
(2024) NEKH02 20232Department of Economics
- Abstract
- The integration of environmental, social, and governance (ESG) considerations in investment decisions is pivotal, driven by global initiatives and a surge in sustainable investment strategies. This study, therefore, examines the relationship between ESG scores and stock returns over the period 2018-2022, focusing on the European financial, healthcare, and industrial sectors to identify potential differences among them. To explain these variations and understand the overall relationship between ESG and stock returns, I employ three theoretical frameworks: the ESG efficient frontier, an equilibrium model, and the stakeholder theory. To discover the relationship, I employ the Fama and French five-factor model on portfolios created based on... (More)
- The integration of environmental, social, and governance (ESG) considerations in investment decisions is pivotal, driven by global initiatives and a surge in sustainable investment strategies. This study, therefore, examines the relationship between ESG scores and stock returns over the period 2018-2022, focusing on the European financial, healthcare, and industrial sectors to identify potential differences among them. To explain these variations and understand the overall relationship between ESG and stock returns, I employ three theoretical frameworks: the ESG efficient frontier, an equilibrium model, and the stakeholder theory. To discover the relationship, I employ the Fama and French five-factor model on portfolios created based on ESG scores. I then evaluate if portfolios exhibit signs of abnormal returns and if they are performing differently from each other. The results highlight minor indications of sector- specific variations; specifically, I observe no relationship between ESG (including pillars) and stock returns in the financial sector. Meanwhile, I discover a negative relationship for the G- pillar of the healthcare sector and for overall ESG. In relation to the industrial sector, I find a negative relationship with the E-pillar and overall ESG. I also observe that low-scored portfolios generally tend to outperform their high-scored counterparts. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9147592
- author
- Rytter, Fredrika LU
- supervisor
- organization
- course
- NEKH02 20232
- year
- 2024
- type
- M2 - Bachelor Degree
- subject
- keywords
- ESG, Sustainable investing, CSR, Portfolio choice, Sector differences
- language
- English
- id
- 9147592
- date added to LUP
- 2024-04-16 09:27:10
- date last changed
- 2024-04-16 09:27:10
@misc{9147592, abstract = {{The integration of environmental, social, and governance (ESG) considerations in investment decisions is pivotal, driven by global initiatives and a surge in sustainable investment strategies. This study, therefore, examines the relationship between ESG scores and stock returns over the period 2018-2022, focusing on the European financial, healthcare, and industrial sectors to identify potential differences among them. To explain these variations and understand the overall relationship between ESG and stock returns, I employ three theoretical frameworks: the ESG efficient frontier, an equilibrium model, and the stakeholder theory. To discover the relationship, I employ the Fama and French five-factor model on portfolios created based on ESG scores. I then evaluate if portfolios exhibit signs of abnormal returns and if they are performing differently from each other. The results highlight minor indications of sector- specific variations; specifically, I observe no relationship between ESG (including pillars) and stock returns in the financial sector. Meanwhile, I discover a negative relationship for the G- pillar of the healthcare sector and for overall ESG. In relation to the industrial sector, I find a negative relationship with the E-pillar and overall ESG. I also observe that low-scored portfolios generally tend to outperform their high-scored counterparts.}}, author = {{Rytter, Fredrika}}, language = {{eng}}, note = {{Student Paper}}, title = {{ESG Performance in European Financials, Industrials, and Healthcare Sectors}}, year = {{2024}}, }