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.
We are particularly grateful to Flavia Nuccitelli for her very valuable work as a research assistant on this project.
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Ciciretti, R., Dalò, A., Ferri, G. (2023). Dissecting the European ESG Premium vs the US: Is It All About Non-financial Reporting?. In: Wachtel, P., Ferri, G., Miklaszewska, E. (eds) Creating Value and Improving Financial Performance. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-24876-4_2
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