Impact of the ESG focus on any efficiency and fairness of the stock market

Abstract

The need to ensure sustainable development of territories has led to the emergence of responsible issuers and investors. At the same time such actors’ impact on the stock indices remains understudied, which makes the studies focused on these issues relevant. The goal of this paper was to see into the impact of investors’ ESG focus on the efficiency and fairness of the stock market. The research draws on 2018-2021 data for 232 Russian firms taken from the ESG Ratingby S&P Global Sustainable and https://smart-lab.ru portal. Indicators of particular companies and the market as a whole were estimated using descriptive statistic methods and Cramer’s V-coefficient, and cluster analysis was done. The results showed that any ESG rated assets have higher dividend yield and stock price to revenues ratio (P/S multiplier), which are statistically significant, but the P/S value can be recognized as optimal both for sustainability-rated assets and the unrated ones. It is concluded that the Russian stock exchange is currently lacking any distributive justice and any responsible investors’commitment has no influence on the market efficiency. The theoretical value of the study lies in its confirming Eugene Fama’s efficient market hypothesis being applicable to responsible issuers’ stocks and in defining the indicators of the market’s distributive justice. Its scholarly importance stems from its assessing the current rate of the Russian stock exchange’s efficiency and fairness when ESG commitments are expanding among investors. The identified failures of the financial market, which managers of responsible companies and shareholders should consider in their activities, are of practical value.