Sustainable investments in the Norwegian stock market

ABSTRACT

This article investigates the link between environmental, social and corporate governance (ESG) ratings and financial performance in the Norwegian stock market. Using Norwegian stock data, we rank companies based on their sensitivity and exposure (beta) toward ESG factors from 2009 to 2018 using the Dow Jones Sustainability Nordic Index. The econometric framework applies a portfolio strategy, as well as a cross-sectional regression. The constructed ESG portfolios do not show any significant return difference based on a high-low strategy, which is robust for market sensitivity, investment style, and industry bias. Regarding the explanatory power and pricing of the ESG factor, we find no supporting evidence. Our results do not suggest any connection between ESG and stock returns in the Norwegian stock market.

GRAPHICAL ABSTRACT

KEYWORDS:

• ESG
• financial performance
• corporate social performance
• portfolio strategy

Disclosure statement

No potential conflict of interest was reported by the authors.