EU Taxonomy and Stock Performance

Abstract

This thesis investigates the link between environmental, social, and corporate governance (ESG) performance and stock performance in Europe between 2012-2021. We apply ESG data from Refinitiv's Eikon database and construct our own framework based on the EU Taxonomy. In combination, we use the SASB (Sustainability Accounting Standards Board) framework to see if there is any coherence between the two. Furthermore, we are sorting portfolios into top-, medium-, and bottom-performance ESG portfolios. Our research finds no abnormal returns between the top-, and bottom-ranked ESG portfolios, suggesting a neutral relationship between ESG performance and stock performance. This implies that ESG performance neither creates nor destroys value and that the EU Taxonomy does not impact our portfolio returns.