Drawing up the bill: Are ESG ratings related to stock returns around the world?

Rómulo Alves; Philipp Krüger; Mathijs van Dijk

doi:10.1016/j.jcorpfin.2025.102768

Drawing up the bill: Are ESG ratings related to stock returns around the world?

Rómulo Alves, Philipp Krüger^*, Mathijs van Dijk

^*Corresponding author for this work

Department of Finance

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We provide the most comprehensive analysis to date of the relation between ESG ratings and stock returns, using 16,000+ stocks in 48 countries and seven different ESG rating providers. We find very little evidence that ESG ratings are related to global stock returns between 2001 and 2020. This finding obtains across different regions, time periods, ESG (sub)ratings, ESG momentum, ESG downgrades and upgrades, and best-in-class strategies. We further find little empirical support for prominent hypotheses from the literature on the role of ESG uncertainty and of country-level ESG social norms, ESG disclosure standards, and ESG regulations in shaping the relation between ESG and global stock returns. Overall, our results suggest that ESG investing did not systematically affect investment performance during the past two decades.

Original language	English
Article number	102768
Journal	Journal of Corporate Finance
Volume	93
DOIs	https://doi.org/10.1016/j.jcorpfin.2025.102768
Publication status	Published - Jul 2025

Bibliographical note

JEL classification: G11, G12, G15

Publisher Copyright: © 2025

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10.1016/j.jcorpfin.2025.102768Licence: CC BY

1-s2.0-S0929119925000367-mainFinal published version, 2.26 MBLicence: CC BY

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title = "Drawing up the bill: Are ESG ratings related to stock returns around the world?",

abstract = "We provide the most comprehensive analysis to date of the relation between ESG ratings and stock returns, using 16,000+ stocks in 48 countries and seven different ESG rating providers. We find very little evidence that ESG ratings are related to global stock returns between 2001 and 2020. This finding obtains across different regions, time periods, ESG (sub)ratings, ESG momentum, ESG downgrades and upgrades, and best-in-class strategies. We further find little empirical support for prominent hypotheses from the literature on the role of ESG uncertainty and of country-level ESG social norms, ESG disclosure standards, and ESG regulations in shaping the relation between ESG and global stock returns. Overall, our results suggest that ESG investing did not systematically affect investment performance during the past two decades.",

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note = "JEL classification: G11, G12, G15 Publisher Copyright: {\textcopyright} 2025",

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Drawing up the bill: Are ESG ratings related to stock returns around the world?

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