The Impact of ESG Risk Score on Holding Period Return

Abstract

Given the background of COVID-19, this paper studies the impact of the ESG Risk score, Environment Risk Score, Social Risk Score and Governance Risk Score on the Hold Period Return (HPR) of S&P 500 Stocks in 2020. The linear regression model is adopted to conduct the research in the SAS 4.6. Other than ESG factor, I also included other 14 independent variables that selected from nine categories derived by Yahoo Finance, which are Valuation Measures, Profitability, Management Effectiveness, Income Statement, Balance Sheet, Cash Flow Statement, Stock Price History, Share Statistics and Dividends & Splits. The model shows ESG Risk score factor does not have an impact on the HPR at 5 percent significant level of the S&P 500 stocks. And this finding also applies to 11 different sectors. However, I found that HPR in some sectors are sensitive to a certain risk factor among Environment Risk, Social Risk and Governance Risk.