Market value relevance of Environmental, Social, and Governance (ESG) Scores

This study analyses the association between Corporate Social Responsibility (CSR) and market data, more concretely share prices and stock returns, for companies listed in the STOXX Europe 600 Index, from 2010 to 2019 period. To measure CSR was used the ESG (Environmental, Social, and Governance) overall score from Refinitiv and its three components: Environmental Score, Social Score, and Governance Score. The modified Ohlson model proposed by Barth and Clinch (2005) was used to study the price model, while the modified Ohlson model proposed by Ota (2005) was used to study the return model. Results suggest a positive association between CSR and market data, but in most models, especially in the price model, these are not statistically significant. Nevertheless, a statistically significant association between market data and changes in ESG scores was found. An additional robustness test suggests that the financial crisis impacted the relationship between CSR and market data. In the years affected by the crisis, investors are less concerned with sustainability issues.