Exploring the impact of ESG and greenwashing scores on stock valuation ratios.

Details

Supervisors

Iania, Leonardo

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion, à finalité spécialisée

Abstract

The 2008 financial crisis highlighted the importance of considering long-term performance and sustainability in corporate vision, moving away from a focus on short-term financial gains. Investors and stakeholders have increasingly sought non-financial information to assess future cash flows and financial risks, though the lack of specific accounting rules for such information poses challenges in its disclosure. While financial information alone may be insufficient to predict a company's future performance, the impact of environmental, social, and governance (ESG) reports on financial performance remains uncertain due to concerns about greenwashing. This study aims to analyze whether including ESG scores and greenwashing scores improves the predictive ability of valuation ratios (PE, PEG, and PBV) for European energy companies. The energy sector's significant environmental impact and ongoing changes make it a focal point, and incorporating alternative energy sources can enhance financial performance and business valuation. By exploring the relationship between financial and non-financial metrics, the research seeks to provide valuable insights for stakeholders, investors, and policymakers to make informed decisions about energy companies' financial performance. The report will employ a linear regression approach to validate hypotheses and address challenges in comparing diverse energy companies, ultimately guiding future research directions.