The Relationship between ESG Scores and Equity Risk Premiums - A Study through Portfolios

Yanghong Huang

doi:10.47297/wspdecWSP2515-797318.20250906

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The Relationship between ESG Scores and Equity Risk Premiums - A Study through Portfolios

9卷第6期

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The Relationship between ESG Scores and Equity Risk Premiums - A Study through Portfolios
The Relationship between ESG Scores and Equity Risk Premiums - A Study through Portfolios
Zhejiang Gongshang University, Hangzhou, Zhejiang, 310018, China
2025年9卷第6期页码：95-100
纸质出版日期：2025-06-30
DOI：10.47297/wspdecWSP2515-797318.20250906
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(2025). The Relationship between ESG Scores and Equity Risk Premiums - A Study through Portfolios. 发展经济学, 9(6), 95-100.

Huang Yanghong.The Relationship between ESG Scores and Equity Risk Premiums - A Study through Portfolios[J].Development Economics of China,2025,09(06):95-100.
(2025). The Relationship between ESG Scores and Equity Risk Premiums - A Study through Portfolios. 发展经济学, 9(6), 95-100. DOI： 10.47297/wspdecWSP2515-797318.20250906.

Huang Yanghong.The Relationship between ESG Scores and Equity Risk Premiums - A Study through Portfolios[J].Development Economics of China,2025,09(06):95-100. DOI： 10.47297/wspdecWSP2515-797318.20250906.

摘要

Abstract

The purpose of this paper is to explore the impact of ESG (Environmental

Social

Governance) scores on the stock risk premium of U.S. companies. The study selects ESG scores

stock returns and other data of 4533 U.S. companies from 2013-2023

and by constructing 5×5 portfolios based on ESG scores and market capitalisation sizes

and conducting regression analyses using the Fama-French three-factor model

the CAPM model

and the Carhart four-factor model

it explores whether companies with high ESG scores can provide risk-adjusted additional returns. The results show that the risk premiums of different ESG score and market capitalisation portfolios differ

but overall do not show significant excess returns; high ESG score portfolios have lower systematic risk (β-value)

yet they do not translate into significant returns; high ESG scores in small-capitalisation firms may show some positive risk-adjusted returns

while the impact of ESG scores is weaker in large-capitalisation firms. Taken together

the impact of ESG scores on portfolio risk-adjusted returns is complex and limited

and investors need to combine other factors to make rational decisions.

关键词

Keywords

references

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