Relationship between ESG Scores, Risk, and Return- An Analysis

Responsible investors are not only interested in financial performance of a company but also consider Responsible investors are te towards environmental, social and governance (ESG). They also believe that the long-term returns will come from the effects of the company on the environment and society that will result in sustainability. The purpose of this study is to analyze whether there exists any correlation among the ESG scores, total Risk and the return of the stocks. Analysis is done with the stocks in the information technology (IT) sector and being traded in BSE for whom ESG scores are available. After analysis, it is found that higher ESG scores have no significant impact on the return of the stocks pertaining to IT Sector being traded in BSE. It is also found that there is no strong statistical evidence to say that the stocks having higher ESG scores earn more than the stocks having lesser ESG scores for the period of study. But it is found that statical evidence exists for the inverse association among ESG scores and total risk. Risk reduces with the higher ESG scores