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The Influence of ESG-scores on Stock Returns in Emerging and Developed Markets

Kajström, Måns LU and Lindeberg, Filip (2025) NEKH03 20242
Department of Economics
Abstract
The integration of environmental, social, and governance (ESG) factors in investment decisions and corporate practices has gained momentum, reflecting the global focus on sustainability and ethical practices. This study investigates the relationship between ESG-scores and stock returns from 2019 to 2022 across three industry groups – manufacturing and raw materials, technology and media services, and consumer goods – in two contrasting economies: the emerging market of China and the developed market of Japan. Employing the Fama and French five factor model, portfolios are constructed and categorised by ESG scores to assess the presence of abnormal returns in each respective market. Our results reveal the following discrepancies: abnormal... (More)
The integration of environmental, social, and governance (ESG) factors in investment decisions and corporate practices has gained momentum, reflecting the global focus on sustainability and ethical practices. This study investigates the relationship between ESG-scores and stock returns from 2019 to 2022 across three industry groups – manufacturing and raw materials, technology and media services, and consumer goods – in two contrasting economies: the emerging market of China and the developed market of Japan. Employing the Fama and French five factor model, portfolios are constructed and categorised by ESG scores to assess the presence of abnormal returns in each respective market. Our results reveal the following discrepancies: abnormal returns are more apparent in high-ESG portfolios in China’s industrial sector, whereas in Japan’s technology sector, low- and mid-ESG portfolios exhibit superior performance. In contrast, consumer goods sectors in both economies display no significant results. These findings suggest that ESG investment strategies may yield varying results depending on industry and market maturity. By bridging insights from emerging and developed economies, this study contributes to the literature on ESG-driven financial performance and implications for global investment strategies. (Less)
Please use this url to cite or link to this publication:
author
Kajström, Måns LU and Lindeberg, Filip
supervisor
organization
course
NEKH03 20242
year
type
M2 - Bachelor Degree
subject
keywords
ESG, Industries, Portfolio selection, Emerging markets, Developed markets.
language
English
id
9184337
date added to LUP
2025-05-16 10:51:18
date last changed
2025-05-16 10:51:18
@misc{9184337,
  abstract     = {{The integration of environmental, social, and governance (ESG) factors in investment decisions and corporate practices has gained momentum, reflecting the global focus on sustainability and ethical practices. This study investigates the relationship between ESG-scores and stock returns from 2019 to 2022 across three industry groups – manufacturing and raw materials, technology and media services, and consumer goods – in two contrasting economies: the emerging market of China and the developed market of Japan. Employing the Fama and French five factor model, portfolios are constructed and categorised by ESG scores to assess the presence of abnormal returns in each respective market. Our results reveal the following discrepancies: abnormal returns are more apparent in high-ESG portfolios in China’s industrial sector, whereas in Japan’s technology sector, low- and mid-ESG portfolios exhibit superior performance. In contrast, consumer goods sectors in both economies display no significant results. These findings suggest that ESG investment strategies may yield varying results depending on industry and market maturity. By bridging insights from emerging and developed economies, this study contributes to the literature on ESG-driven financial performance and implications for global investment strategies.}},
  author       = {{Kajström, Måns and Lindeberg, Filip}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Influence of ESG-scores on Stock Returns in Emerging and Developed Markets}},
  year         = {{2025}},
}