ESG Stock Volatility Lower


    A group of ESG companies listed in the Dow Jones Sustainability Indices (DJSI) shows lower stock return volatility in comparison to the reference companies ‒ on average by 28.67 percentage points less, says a study by Granito & Partners in collaboration with Madrid’s IE Business School. However, it found risk varies according to industry, with a stronger impact in materials, banking, energy, and technology and the difference ranges from 6.1 percentage points (for food and beverage) to as much as 50.75 percentage points (the energy industry). This difference is a risk premium that the reference or non-ESG companies face and that investors should take into consideration when making investment decisions. In contrast to conventional thinking in which lower risk means lower return, the model shows that even with a lower risk, the investment could achieve a higher equity return. Across all 12 industries, the positive effect on equity return is 6.12 percentage points higher for ESG companies on average.