Doctoral dissertation: Good ESG Ratings Do Not Guarantee Gains - Nor Losses

As sustainability issues receive increasing attention, ESG (Environmental, Social, and Governance) investing has emerged as one of the central themes in the global investment landscape. In his doctoral dissertation, Thanh Nam Vu, M.Sc. (Finance), from the Jyväskylä University School of Business and Economics, examined how incorporating ESG criteria into investment portfolio allocation affects financial returns, challenging prevailing assumptions about the valuation of ESG information in financial markets.

Read more about the dissertation event

M.Sc. (Finance) Thanh Nam Vu defends the doctoral dissertation "ESG investing: Dynamics of Performance and Valuation in an Evolving Market" on May 16, 2025, at 12:00 in the Lea Pulkkisen sali (Ag B431.1) at the Ģ��ֱ��.

Published

13.5.2025

With ESG information increasingly integrated into investment evaluation frameworks and asset allocation processes, its ability to provide financial advantages or disadvantages has largely diminished. Markets have already incorporated ESG information into stock valuations, neutralizing any unexpected profits or losses attributed to investing in companies with high or low ESG. Vu states, "Investors pursuing this ESG strategy do not seem to experience significant gains or losses."

This finding also suggests that investors can pursue sustainability objectives without sacrificing financial performance.

ESG News: Short-Term Effects

When assessing the impact of news related to corporate ESG practices, Vu's research finds that companies typically experience a decline in market value following negative ESG media coverage. However, these losses are often reversed within one month of the initial news release, and the long-term effects of ESG news on firm valuation are limited.

"This phenomenon raises questions about the role of sustainability criticism in encouraging firms to do better due to the potential dismissal of the effects of ESG news shocks in the long-term firm valuation," Vu highlights.

Strong Governance: The Stability Factor

The dissertation further underscores governance as the most crucial component of ESG for achieving financial resilience. Vu highlights that "firms with robust governance practices benefit most from intensified global attention to sustainability, which translates into enhanced financial returns and improved risk mitigation."

This finding reinforces the vital role of effective corporate governance in stabilizing a company's market capitalization amid rising societal concerns about sustainability.

M.Sc. (Finance) Thanh Nam Vu defends the doctoral dissertation "ESG investing: Dynamics of Performance and Valuation in an Evolving Market" on May 16, 2025, at 12:00 in the Lea Pulkkisen sali (Ag B431.1) at the Ģ��ֱ��. The opponent is Professor Markku Kaustia (Aalto University) and Custos Associate Professor Heikki Lehkonen (Ģ��ֱ��). The public defense is held in English.

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Further information:
Thanh Nam Vu
vuthanam@jyu.fi