Sustainable Investments : The effect of ESG and the EU Taxonomy on Nordic stock returns.

Sammanfattning: This study analyzes if there is a connection between ESG - which stands for Environmental, Social and Governance, and stock returns over time. The study also analyzes how integrating ESG can impact a company's competitiveness long term. This is done by researching the following two research questions:  How can a multiple regression model be formulated to determine if there is a connection between ESG and stock returns? How are companies integrating ESG and sustainability practices and what are the benefits of doing so? The first question was answered by performing a regression analysis on ESG factors reported on Nordic stocks and determining if the dependent variable ROI could be explained by these. The second question was answered by conducting a literature review and interviews with relevant actors. The results from the multiple regression analysis showed a low adjusted R2 of 0.23 which implied that there is no clear relationship between ESG factors and ROI. The literature review shows that there are positive outcomes associated with a company being sustainable that are not directly related to the financial yield. The interviews examined how different companies are integrating ESG and sustainability work into their business practice to achieve long term competitiveness while also complying with regulations coming from the EU. In conclusion, there is no clear relationship between ESG and stock return, and the focus with ESG lies within ensuring that a company integrates sustainability to keep a competitive spot in the market and reduce risk, while also reducing their environmental and social impact.