Relationship between ESG score variation and stock returns: empirical evidence from European equity market in 2018-2022.

The purpose of this paper is to assess the impact of environmental, social, and governance (ESG) score variation on corporate financial performance. This research, carried out using the Bloomberg platform and RobecoSAM for data collection, involved 356 European companies of the STOXX Europe 600 index, for which data were collected for the years 2018 to 2022. Portfolio construction was used to measure the impact of the overall ESG score change on stock returns. In the two models used, the ESG score improvement positively and statistically significant impact financial performance, while ESG score deterioration has a negative influence on financial performance. Furthermore, the results of this study confirm that the findings are consistent throughout the sectors. This study attempts to contribute by filling the gap in the literature on the relationship between ESG score variation and corporate financial performance.