The EU Green Deal and ESG Risk: Evidence from Nordic Stock Market Reactions

Abstract

Dette speciale undersøger, hvordan annonceringen af Den Europæiske Unions Grønne Pagt påvirkede aktiemarkedsudviklingen blandt børsnoterede nordiske virksomheder, med særlig fokus på, hvordan investorreaktionerne varierede afhængigt af virksomhedernes ESG-risikoprofil. Undersøgelsen analyserer de kumulative abnorme afkast omkring annonceringen for at vurdere, om ESG-risikoen modererede markedets reaktioner. Resultaterne viser, at virksomheder med lav ESG-risiko oplevede statistisk signifikante positive abnorme afkast på tværs af flere event-vinduer, hvilket antyder, at markedet belønnede virksomheder, der opfattes som godt tilpasset bæredygtighedsmålene. Overraskende nok udviste virksomheder med høj ESG-risiko ikke signifikante negative markedsreaktioner; faktisk viste flere vinduer positive abnorme afkast. Regressionsanalyser viste ikke en entydig effekt af ESG-risiko i hele stikprøven, men positive og statistisk signifikante ESG-koefficienter blev identificeret i specifikke sammenhænge, særligt blandt højrisikovirksomheder og i det danske marked. Disse resultater indikerer, at markedets reaktion på bæredygtighedsrelaterede politiske initiativer er heterogen og betinget. Selvom stærke ESG-profiler konsekvent ser ud til at blive belønnet, kan virksomheder med forhøjet ESG-risiko også tiltrække investorinteresse – især under gunstig markedsstemning eller i konteksten af overgangsfortællinger. Studiet bidrager til ESG-finansieringslitteraturen ved at fremhæve behovet for en mere nuanceret analyse, der tager højde for virksomheds- og landespecifikke forhold ved vurderingen af, hvordan bæredygtighedsrisici og -muligheder prissættes på kapitalmarkederne.

This thesis investigates how the announcement of the Green Deal of the European Union influenced the performance of the stock market among publicly listed Nordic firms, with a particular focus on how investor reactions varied depending on the ESG risk ratings. The study evaluated the cumulative abnormal returns surrounding the announcement to determine whether the ESG risk moderated market responses. The findings reveal that companies with low ESG risk experienced statistically significant positive abnormal returns across multiple event windows, suggesting that the market rewarded companies perceived as well aligned with sustainability goals. Surprisingly, companies with high ESG risk did not exhibit significant negative market responses; in fact, several windows indicated positive abnormal returns. Regression analysis did not show a consistent effect of ESG in the entire sample, but positive and statistically significant ESG coefficients were identified in specific contexts, particularly among high risk companies and within the Danish subsample. These results indicate that the market response to sustainability-related policy initiatives is heterogeneous and conditional. Although strong ESG profiles appear to be consistently rewarded, firms with elevated ESG risk may also attract investor interest, particularly under favorable market sentiment or transition narratives. This study contributes to the ESG finance literature by highlighting the need for disaggregated analysis that considers firm- and country-level contexts in evaluating the pricing of sustainability risks and opportunities in capital markets.

A master thesis from Aalborg University

The EU Green Deal and ESG Risk: Evidence from Nordic Stock Market Reactions

[Den Europæiske Grønne Pagt og ESG-risiko: Evidens fra nordiske aktiemarkedsreaktioner]