The Influence of ESG Performance of Companies on Stock Excess Returns: A Case Study of Mining Companies in the U.S. Stock Market

Abstract

The evaluation of environmental, social, and governance (ESG) performance has become increasingly important for companies to ensure their long-term sustainability and stability and for investors in assessing the financial performance and long-term prospects of companies. This paper selects 91 mining companies listed on the U.S. stock market from 2013 to 2022 and investigates the relationship between their ESG performance and stock excess returns. To contain more companies and to make the results more accurate, this paper classifies these companies into 12 groups according to their ESG scores from Bloomberg ESG database and uses them to construct four different investment portfolios. The relationship between ESG and excess return is further explored using descriptive statistics, regression analysis based on Fama-French three-factor model. The results show that the excess return on stocks varies widely between the best ESG performance companies and the worst performance ones, which could be explained by Market Risk Premium factor and Size factor in FF3 model. This paper provides valuable insights for investors and mining companies, demonstrating the importance of ESG factors when evaluating a company's long-term prospects and financial performance.