DYNAMIC RELATIONSHIP BETWEEN ESG VALUE AND RISKINESS

The aim of this paper is to study price risk and sustainability relationship, measuring the dynamic relationship between ESG value and riskiness: few papers have argued that ESG will also impact the firm's risk, and not just the return.. We try to contribute to the literature through several aspects. First, we use an extensive database of international large cap stocks: we investigate U.S and Europe financial market. Secondly, we assess the magnitude and direction of the relationship between ESG attitudes and riskiness by industries. In our examination we also consider time dependency effect (global crises, bear or bull market). Lastly, we contribute to the growing literature of ESG factors as determinants of performance. We find a negative and significant relation between ESG attitude and riskiness, especially when we consider systematic risk and standard deviation. In time of crisis and bull market, we still document a negative relation when we consider both systematic risk and standard deviation, while we report some significant results for specific risk in time of bear market. We also find evidence of a negative relation when we consider different industries, with respect to both systematic and specific risk. We need to deepen our understanding about the real causes of these evidences about time and industry influences, but as a whole we believe these results interesting. In the near future, we can disentangle the effect of ESG scores on financial risks (idiosyncratic and systematic, taking care also of time and industry influences), considering the different components (Environmental, Social and – especially – Governance) of ESG scores. We think that this effort could better our understanding of managerial decisions influencing the company risk, and furthermore improving the knowledge about investment portfolio choices.