Doing safe by doing good : ESG investing and corporate social responsibility in the U.S. and Europe
- This paper examines the profitability of investing according to environmental, social and governance (ESG) criteria in the U.S. and Europe. Based on data from 2003 to 2017, we show that a portfolio long in stocks with the highest ESG scores and short in those with the lowest scores yields a significantly negative abnormal return. Interestingly, this is caused by the strong positive return of firms with the lowest ESG activity. As we find that increasing ESG scores reduce firm risk (particularly downside risk), this hints at an insurance-like character of corporate social responsibility: Firms with low ESG activity need to offer a corresponding risk premium. The perception of ESG as an insurance can be shown to be stronger in more volatile capital markets for U.S. firms, but not for European firms. Socially responsible investment may therefore be of varying attractiveness in different market phases.
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| Author: | Christina E. BannierORCiDGND, Yannik Bofinger, Björn Rock |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-480587 |
| URL: | https://ssrn.com/abstract=3387073 |
| Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 621 |
| Series (Serial Number): | CFS working paper series (621) |
| Publisher: | Center for Financial Studies |
| Place of publication: | Frankfurt, M. |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2019 |
| Year of first Publication: | 2019 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2019/05/13 |
| Tag: | ESG; FamaFrench model; corporate social responsibility; downside risk; dynamic panel GMM estimation; insurance; sustainability |
| Issue: | April 29, 2019 |
| Page Number: | 36 |
| HeBIS-PPN: | 449369781 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
