ESG Scores and Equity Value: A Study of ESG Premium in the Nordic markets

Abstract

This study explores the relationship between ESG scores and P/B ratios for Nordiclisted companies. We find indications of differences in average P/B and ESG scores. To explore if ESG drives P/B differences, we develop a panel-regression model with six control variables. We find evidence that assets with an ESG score have a higher P/B ratio (β = 0.0046***), after controlling for traditional drivers of P/B. This confirms our expectation that investors are willing to pay a premium for ESG performance. Contrary to the literature, further investigation shows that low ESGscoring companies tend to have a higher price premium than high ESG-scoring companies when accounting for control variables and NAs. We discuss implications and possible explanations for these findings and formulate advice for Nordic firms and Asset managers. Keywords: