Dissecting the European ESG premium vs the US: Is it all about non-financial reporting?

Rocco Ciciretti, Ambrogio Dalò, Giovanni Ferri

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Abstract

For optimists its accelerated sustainable transition gives Europe a competitive advantage toward investors who increasingly demand financial assets. For pessimists, instead, the transition imposes huge and unjustified costs. We assess whether Europe is outperforming the US in sustainable finance, which is driven by companies’ ESG ratings, measuring environmental risks (E—Environmental), social ones (S—Social), and companies’ own administration risks (G—Governance). Comparing S&P500 companies with a similar group of listed European companies, the latter enjoy 14% higher mean ESG ratings than the latter. We also show that the EU advantage descends from EU companies’ better non-financial disclosure. Thus, EU green transition policies offer European companies’ advantages in accessing sustainable finance and, at least in this area, optimists seem to be right.
Original languageEnglish
Title of host publicationCreating Value and Improving Financial Performance
Subtitle of host publicationInclusive Finance and the ESG Premium
PublisherPalgrave MacMillan
Chapter2
Pages27-57
Number of pages31
ISBN (Electronic)978-3-031-24876-4
ISBN (Print)978-3-031-24875-7
DOIs
Publication statusPublished - 22-Mar-2023

Publication series

NamePalgrave Macmillan Studies in Banking and Financial Institutions
PublisherPalgrave Macmillan
ISSN (Print)2523-336X
ISSN (Electronic)2523-3378

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