Study
| EST. READ TIME 1 MIN.ESG rankings have no significant effect on investment performance of Canadian public companies
ESG Investing and Financial Returns in Canada
- ESG investing incorporates environmental (E), social (S), and governance (G) considerations into investment decisions. Until recently, ESG-themed investing comprised an increasing share of investments made by professional money managers and retail investors.
- Financial industry executives and regulators who have promoted ESG-themed investing argue that it will enhance investment performance either by increasing asset returns and/or by reducing investment risk.
- However, empirical studies, on balance, find no consistent and statistically significant evidence of a positive relationship between the ESG rankings of individual companies or portfolios of companies and the financial performances of those companies or investment portfolios.
- Most empirical studies have focused on US-based publicly traded companies. To our knowledge, this study is the first to focus on returns to ESG-themed investing for Canadian-based public companies.
- Using data from MSCI, a leading ESG ratings provider, we estimate the statistical relationship between changes in ESG rankings of companies and changes in equity returns for those companies using a sample of 310 companies listed on the Toronto Stock Exchange between 2013 and 2022.
- Our study finds that neither upgrades nor downgrades in ESG ratings significantly affect stock market returns.
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Steven Globerman
Senior Fellow and Addington Chair in Measurement, Fraser InstituteMr. Steven Globerman is a Senior Fellow and Addington Chair in Measurement at the Fraser Institute. Previously, he held tenuredappointments at Simon Fraser University and York University and has been a visiting professor at the University of California, University of British Columbia, Stockholm School of Economics, Copenhagen School of Business, and the Helsinki School of Economics.He has published more than 200 articles and monographs and is the author of the book The Impacts of 9/11 on Canada-U.S. Trade as well as a textbook on international business management. In the early 1990s, he was responsible for coordinating Fraser Institute research on the North American Free Trade Agreement.In addition, Mr. Globerman has served as a researcher for two Canadian Royal Commissions on the economy as well as a research advisor to Investment Canada on the subject of foreign direct investment. He has also hosted management seminars for policymakers across North America and Asia.Mr. Globerman was a founding member of the Association for Cultural Economics and is currently a member of the American and Canadian Economics Associations, the Academy of International Business, and the Academy of Management.He earned his BA in economics from Brooklyn College, his MA from the University of California, Los Angeles, and his PhD from New York University.… Read more