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Impact of ESG performance on the cost of capital in the energy, utilities, and basic materials sectors

Author

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  • Wilberg, Sindre
  • Kjellevoll, Vibeke
  • Holz, Franziska
  • Neumann, Anne

Abstract

This paper explores the presence of an environmental, social, and governance (ESG) premium for firms operating in the energy, utilities, and basic materials sectors. Specifically, we examine the influence of ESG performance on firms’ cost of capital in both debt and equity markets. We apply a measure of the ex ante implied cost of equity and the cost of debt to a global sample of over 24,000 firm-year observations spanning the period from 2010 to 2021. We also investigate the financial impact of each component of the aggregated ESG score. We employ a pooled ordinary least squares with robust standard errors, controlling for firm-specific and macroeconomic factors.

Suggested Citation

  • Wilberg, Sindre & Kjellevoll, Vibeke & Holz, Franziska & Neumann, Anne, 2025. "Impact of ESG performance on the cost of capital in the energy, utilities, and basic materials sectors," Utilities Policy, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:juipol:v:97:y:2025:i:c:s0957178725001316
    DOI: 10.1016/j.jup.2025.102016
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