Investigating the relationship between ESG factors and market performance in Spain

Abstract

Environmental, Social and Governance (“ESG”) reporting has gained significant prominence across global markets in the last decade. Public interest, scientific studies and regulatory initiatives have all impacted how corporations approach their operations and manage their business models. However, there is a lack of conclusive evidence that would suggest ESGrelated initiatives create positive value for firms. This paper evaluates the potential relationships between factors related to ESG reporting and corporate market performance within the Spanish market using multiple linear regression models. The findings show mixed results, with social variables showing a positive relationship with market performance and governance variables showing a negative relationship. Negative relationships between ESG factors and market performance suggest investors are not convinced by ESG initiatives. Insufficient results within environmental variables resulted in an inability to determine a relationship with market performance. Investment trends will shape the future of ESG, whether driven by shareholder values or pressure from all stakeholders.