Power Play: The influence of energy prices on ESG Stocks’ performance during the Energy Crisis A quantitative study performed on the Swedish stock market

Abstract

This research paper is focused on the impact of the European energy crisis on ESG (Environmental, Social, and Governance) stocks. The paper aims to examine the extent to which the performance of stocks with high ESG scores has been affected by energy prices and volatility during the energy crisis. The paper emphasizes the significance of sustainability and the increasing importance of ESG stocks for investors and society, particularly in the transition to more sustainable energy sources. The study focuses on the Swedish market, using the Refinitiv Sweden index as a representative sample. The research questions address the impact of energy prices and volatility on the performance of high ESG-scored stocks during the energy crisis. The methodology involves quantitative analysis using data from Refinitiv Eikon and covers the period from 2019 to the end of 2022. The regression models examine the relationship between energy prices/volatility and market-adjusted returns, controlling for variables such as return on assets, book-to-market ratio, and debt-to-equity ratio. Fixed effects are included to account for company-specific and year-specific factors. Regression results indicate a significant negative relationship between energy prices/volatility and the performance of high ESG-scored stocks.