Market Valuation of Growth in ESG Companies

Abstract

The increased interest in sustainability among investors has raised questions regarding the fundamentals of the valuation for sustainable companies, often called ESG companies. This thesis researches the market valuation of the growth rate of revenue in ESG companies, compared to non-ESG companies, to evaluate if there exist any differences. A quantitative method has been used to study this relation, and the study was conducted with a sufficiently large sample from the European markets between 2017 to 2020 to create a reliable result. From the findings, it could not be concluded that there is a significant valuation difference for the growth rate of revenue depending on whether a company is considered an ESG company or not. Hence, the growth rate of revenue could not be a factor explaining differences in the market valuations of ESG companies.