The impact of sustainability criteria on risk and return in the stock market

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Projektart und Laufzeit

Dissertation, seit September 2019


Lehrstuhl für Betriebswirtschaftslehre, Bank- und Finanzmanagement


Wealth Management


Banking and Finance


Sustainability aspects such as Environmental, Social and Governance (ESG) criteria are recently often considered in the investment decisions of many financial institutions. The aim of this cumulative dissertation is to add value to the debate about the consideration of sustainability criteria in the investment process.

In the first paper, we investigate the time-varying nature of ESG materiality. We build on the concept that sector-specific materiality of environmental, social, and governance (ESG) issues varies over time, based on corporate managers being aware of ESG issues material to their industry - as made publicly available by e.g., the SASB materiality map - and consequently adapting their business model to account for these risks.

Thereon, business should demonstrate a change in ESG issues of material relevance after a successful transformation. To capture the time-varying nature of ESG materiality, we build on the SASB materiality framework and measure materiality by means of ESG issues that have a significant negative impact on future firm-level risk.
The second paper deals with the role of corporate innovation within the relationship between corporate social performance and corporate financial performance from the perspective of firm risk. Would like to answer the question, to which extent a firm's degree of innovation moderate or even mediate a firm's CSP within this relationship.

The third paper aims to figure out whether CSP allows to do better predictions in value investing approaches. This approach presupposes that future firm performance (e.g., cash flows) is not accurately reflected in current stock prices. Therefore, the extrinsic price, or market price, is assumed to be lower than the intrinsic value, or investor's biased expectations. Consequently, the stock price is regarded as undervalued. Following the Value/Glamour effect concept, price corrections are caused by expectation errors. Expectation errors occur, if market expectations are not in line with the strength of firms' fundamentals. We will investigate, whether ESG information can support investors to reduce these expectation errors and to predict future firm performance more precisely.


ESG risk materiality, Sustainable investing, Public trust