Sustainability Performance and the Cost of Capital

This study examines the association between firms’ environmental, social, and governance (ESG) performance cost of capital for largest European firms listed on STOXX Euro 600 in a large panel from 2002 to 2018. We find that ESG is priced by both debt equity markets, although different directions. While better associated with lower equity, relationship positive regarding debt. also account industry idiosyncrasies. The penalized lagging compared peers, median corporate sustainability score around optimal balance not influential shaping periods financial sovereign crises. Overall, same research setting, we channels composition behave differently response changes performance.