ESG combined score effects on stock performance of S&P 500-listed firms

The influence of ESG combined scores on the stock performance (excess return, volatility, and liquidity) of S&P 500-listed firms was examined from June 2013 to May 2023. Ordinary least squares and heterogeneity analyses were used, with robustness checks performed through the use of endogenous treatment and fixed-effects models. Results indicated that ESG combined scores are negatively correlated with returns and liquidity but positively correlated with volatility. The stocks of low-ESG firms were more ESG-sensitive than those of high-ESG firms. The impact of COVID-19 on stock price volatility was also considerable. The results contradicted the view that ESG enhances market performance, highlighting the need for active, sustained stakeholder engagement concerning ESG practices.