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Evidence on environmental, social and governance practices associated with the cost of capital of companies in the capital markets in G20 countries

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Listed:
  • Carvalho, Patrícia Lacerda de
  • Martins, Orleans da Silva
  • Callado, Aldo Leonardo Cunha
  • Junior, Antonio Deusany de Carvalho

Abstract

This study examines the relationship between environmental, social, and governance (ESG) practices and the costs of equity and debt capital in 19 G20 countries, excluding the European Union. Using panel data from 3,651 companies between 2005 and 2021, the ESG scores from Refinitiv (ESG performance) and Bloomberg (ESG disclosure) were applied. The results show a negative and significant relationship between ESG practices and companies’ cost of capital, suggesting that engagement in ESG activities lowers financing costs. Additionally, there is no perfect correlation between ESG performance and ESG disclosure scores, indicating that these metrics capture distinct aspects of corporate sustainability. This study highlights the strategic importance of ESG practices in influencing the cost of capital and emphasizes the need to use distinct metrics to assess the different dimensions of corporate sustainability.

Suggested Citation

  • Carvalho, Patrícia Lacerda de & Martins, Orleans da Silva & Callado, Aldo Leonardo Cunha & Junior, Antonio Deusany de Carvalho, 2025. "Evidence on environmental, social and governance practices associated with the cost of capital of companies in the capital markets in G20 countries," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 65(1), February.
    • Handle: RePEc:fgv:eaerae:v:65:y:2025:i:1:a:93038
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