ESG events and global stock prices: how a focus on investment ethics impacts on stock prices in different countries

Incorporating social and environmental ethics into investment decision making is an accelerating trend – nowhere more than in the United States. As listed companies have come under more public pressure to consider environmental, social and governance (ESG) issues, researchers and analysts have been dissecting the outcomes. In a recent project, Dr. Bei Cui from Monash Centre for Financial Studies (MCFS) researched and analysed the share prices of US S&P1500 companies before and after ESG events over an extended period. The study found evidence of significant market overreactions to ESG controversies, resulting in opportunities for traders to earn abnormal profits. But would these observations – and opportunities – hold true in markets other than the US? For this latest MCFS research project, stock market and news data was collected from 23 countries, including Australia, to examine the extent of the ESG culture globally, and to test and compare the impacts on stock prices when listed companies in various countries become the subject of environmental, social or governance news events.