This paper investigates the relationships between environmental, social, and governance performance and the cost of capital in the European context. Using data from 489 publicly listed companies in the STOXX Europe 600 index over an 8-­ year period (2015–2022), comprising 3317 firm-­ year observations, we analyze variations in this relationship over time. Our findings indi- cate that companies with strong ESG performance tend to enjoy lower costs of debt, reflecting favorable borrowing conditions perceived by debt financiers. Conversely, we observe a positive relationship between ESG performance and the cost of equity, suggesting higher expected returns for equity investors due to perceived long-­ term risk. Furthermore, temporal analysis reveals that the relationship between ESG performance and the cost of capital became more pronounced from 2020 to 2022, potentially driven by heightened attention to sustainability practices and regulatory interventions. This study contributes to the theoretical understanding of the evolving role of sustainability in financial markets and its implications for corporate finance decisions

ESG dynamics: assessing the link between sustainability practices and the cost of capital

Tron, Alberto;Colantoni, Federico;
In corso di stampa

Abstract

This paper investigates the relationships between environmental, social, and governance performance and the cost of capital in the European context. Using data from 489 publicly listed companies in the STOXX Europe 600 index over an 8-­ year period (2015–2022), comprising 3317 firm-­ year observations, we analyze variations in this relationship over time. Our findings indi- cate that companies with strong ESG performance tend to enjoy lower costs of debt, reflecting favorable borrowing conditions perceived by debt financiers. Conversely, we observe a positive relationship between ESG performance and the cost of equity, suggesting higher expected returns for equity investors due to perceived long-­ term risk. Furthermore, temporal analysis reveals that the relationship between ESG performance and the cost of capital became more pronounced from 2020 to 2022, potentially driven by heightened attention to sustainability practices and regulatory interventions. This study contributes to the theoretical understanding of the evolving role of sustainability in financial markets and its implications for corporate finance decisions
In corso di stampa
2025
Tron, Alberto; Franceschi, Luca Francesco; Colantoni, Federico; Paolone, Francesco
File in questo prodotto:
File Dimensione Formato  
Corp Soc Responsibility Env - 2025 - Tron - ESG Dynamics Assessing the Link Between Sustainability Practices and the Cost.pdf

non disponibili

Descrizione: article
Tipologia: Pdf editoriale (Publisher's layout)
Licenza: Copyright dell'editore
Dimensione 299.19 kB
Formato Adobe PDF
299.19 kB Adobe PDF   Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4073096
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact