Does it pay to score high on ESG: An event study on the Swedish Stock Market

Sammanfattning: Using daily stock returns of publicly traded Swedish companies, this paper aims to evaluate the difference in return performance between high-rated and low-rated ESG stocks in light of two events - COVID-19 and the Russia-Ukraine War. The overall study is conducted using an event study analysis, wherein the Carhart 4-Factor Model is employed to predict expected returns throughout the event window. A baseline event window of 11 days is used to analyze results across our two events. The outcome reveals that high- and low-rated ESG stocks did not perform differently around the declaration of COVID-19 as a pandemic by WHO. On the other hand, high-rated ESG stocks outperformed their low-rated peers during the 2022 Russian invasion of Ukraine. Our results are robust to alternative event windows.