Financial Performance of Firms with Low Respectively High ESG Scores - A study of the US Technology sector

Abstract

This study investigates the relationship between financial performance and ESG score over a five-year time period, January 2013 to January 2018, in the US market. To examine this, two small cap portfolios is constructed, one consisting of firms with high ESG scores and one with low ESG scores. Additionally, two portfolios are constructed likewise for firms with large market capitalization. Furthermore, Carhart’s four factor model is applied to investigate if there appears to be a difference in the portfolios’ stock performance. Evidence is found that the small cap portfolio with low ESG scores outperformed the small cap portfolio with high ESG scores. Although, no statistical evidence is found whether there is a relationship between stock performance and ESG score for firms with large market capitalization.