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Published in: Review of Quantitative Finance and Accounting 4/2023

31-01-2023 | Original Research

The impact of ESG risks on corporate value

Author: Gil Cohen

Published in: Review of Quantitative Finance and Accounting | Issue 4/2023

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Abstract

The following research has analyzed the linkage between ESG sustainability scores to the firm’s valuations. We provide evidence that the total ESG score is diminishing for the S & P500 firms from 2019 till 2021 meaning that these risks factors take their rightful place in the global economy. We find that the impact of environmental risks on the firm’s valuation is not significant enough. Moreover, we found that while the “Beta” risk factor of the S & P500 carries environmental risks, it does not hold such risks for Nasdaq100 stocks, and therefore, we recommend strengthening the environmental education to investors and other financial industry participants. This research also provides evidence that social risk impact negatively the simple excess return for both the S & P500 and nasdaq100 stocks indicating that social issues must be mitigated in order to maximize a firm value. Moreover, we find that the traditional CAPM “Beta” carries environmental and corporate governance risks for the S & P500 stocks. However, it totally neglects social risks and therefore it can not be used in modern ages where social risk are very important to all participants of the global economic environment.

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Metadata
Title
The impact of ESG risks on corporate value
Author
Gil Cohen
Publication date
31-01-2023
Publisher
Springer US
Published in
Review of Quantitative Finance and Accounting / Issue 4/2023
Print ISSN: 0924-865X
Electronic ISSN: 1573-7179
DOI
https://doi.org/10.1007/s11156-023-01135-6

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