ESG and stock market performance : An Empirical Study of the Link between ESG Performance and Stock Performance of Scandinavian Companies
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- Master Thesis 
This thesis investigates the relationship between environmental, social, and corporate governance (ESG) performance and stock performance in Scandinavia between 2011-2020. We analyze the difference in stock performance between companies with high and low ESG performance. To measure ESG performance, we apply various ESG ratings from Refinitiv. Using a long-short zero investment strategy, we examine differences in stock performance between high and low ESG rated companies. By employing Fama-French three-, four- (Carhart) and five-factor models, we control for possible different risk exposures between the portfolios. The portfolios based on ESG score show a neutral relationship. The neutral relationship is consistent when controlling for ESG controversies, the company’s media exposure related to ESG incidents. Amongst the three ESG dimensions, we also find a neutral relationship with portfolios based environmental and social scores. However, screening on governance score, the strategy leads to abnormal returns, indicating a positive relationship.