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Does a sustainability risk premium exist where it matters the most?

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  • Ferrat, Yann
  • Daty, Frédéric
  • Burlacu, Radu

Abstract

Using a sample of ESG ratings, we examine the sustainability risk premium for developed and emerging markets between 2015 and 2019-end. Our results show that this premium is not empirically distinguishable in developed equity markets, whilst highly positive in the emerging ones. We further partition the emerging markets to comprehend whether country development and firm size have an impact on the sustainability risk premium. As uncovered, both factors play a significant role in the emergence of the risk premium. Consequently, larger corporations and advanced nations drive sustainability in the emerging markets and thus experience the financial benefits.

Suggested Citation

  • Ferrat, Yann & Daty, Frédéric & Burlacu, Radu, 2022. "Does a sustainability risk premium exist where it matters the most?," Emerging Markets Review, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:ememar:v:53:y:2022:i:c:s1566014122000607
    DOI: 10.1016/j.ememar.2022.100943
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    More about this item

    Keywords

    Corporate social responsibility (CSR); Emerging markets; Portfolio analysis; Socially responsible investments (SRI); Sustainability risk premium;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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