The impact of ESG factor materiality on stock performance of firms

The impact of ESG factor materiality on stock performance of firms

Firms, investors and other stakeholders have come to understand the importance of social, environmental and governance (ESG) issues in the world. This has led to a boom in the number of sustainable funds, investors integrating ESG factors in their analyses and UNPRI signatories. So far though, there has been limited academic research regarding which ESG factors have material impacts on firms. This is conflicting as investors state that the prime reason for considering ESG factors is that they believe it has a material financial impact on investment performance. Many corporations are publishing materiality matrixes within their sustainability reports, because this information gives insight into the risks and opportunities that the firm faces. As these material factors are presumably influencing firm performance, it is key for investors to gain a better understanding of these factors and their impacts. RSM-graduate Kelly van Heijningen did a study on this topic. Read the full working paper here.