The Relationship Between ESG Ratings and Stock Performance : A Study of Nordic Companies
Nurro, Joni (2025)
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-202503254923
https://urn.fi/URN:NBN:fi:amk-202503254923
Tiivistelmä
Environmental, Social, and Governance (ESG) factors have become increasingly relevant in investment decisions in recent years. ESG ratings, while still not perfect, are becoming more and more crucial for evaluating investments, and companies as a whole. This thesis examines the relationship between ESG ratings and stock performance, with a focus on the Nordic region. Using data from 53 publicly listed Nordic companies (specifically Finland, Sweden, Norway, and Denmark) across multiple sectors, the study analyzes ESG ratings and the stock price changes over a 5-year time period (2020-2024).
Key findings reveal that companies with higher ESG ratings can indeed potentially exhibit stronger performance, but a good rating on its own does not guarantee much. These results align with existing literature while providing additional context specifically within the Nordics. The primary findings from this study are that ESG compliance may have benefits other than just perhaps enabling stronger performance in the stock market, but also in things such as risk reduction, lowering the cost of capital, and of course, being more sustainable. It is worth keeping in mind that the premise of ESG metrics is not related to financial returns, and as such even if a company that focuses more on ESG topics does not automatically offer better returns, but often very similar returns, it may still be a worthwhile investment, assuming the investor can trust the ESG frameworks to be functional and reliable.
Ultimately, there are still many limitations within the topic, and further regulation and optimization of ESG frameworks should enable significantly more conclusive results.
Key findings reveal that companies with higher ESG ratings can indeed potentially exhibit stronger performance, but a good rating on its own does not guarantee much. These results align with existing literature while providing additional context specifically within the Nordics. The primary findings from this study are that ESG compliance may have benefits other than just perhaps enabling stronger performance in the stock market, but also in things such as risk reduction, lowering the cost of capital, and of course, being more sustainable. It is worth keeping in mind that the premise of ESG metrics is not related to financial returns, and as such even if a company that focuses more on ESG topics does not automatically offer better returns, but often very similar returns, it may still be a worthwhile investment, assuming the investor can trust the ESG frameworks to be functional and reliable.
Ultimately, there are still many limitations within the topic, and further regulation and optimization of ESG frameworks should enable significantly more conclusive results.