Considerations around the Environmental, Social, and Governance (ESG) aspects of companies have become a factor widely taken into account by investors and other market participants, consumers, and stakeholders. Using ESG controversies collected by Moody’s ESG Solutions and ESG data from RepRisk, we analyze the effects of ESG performance on firm market value. Our findings show that ESG controversies lead to large, statistically significant negative abnormal equity returns, both in the short-run and over a one-year horizon. We find that moderate to severe ESG events generate abnormal stock market losses of −1.3% to −7.5% over twelve months, which represents a loss of approximately $400 million for a typical-sized firm in the study.
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