Do Investors in Mining Companies Price ESG Performance into Their Required Equity Returns?

Sammanfattning

In recent years, environmental, social and governance (ESG) considerations have become more prominent in capital markets, particularly in sectors with high environmental and social impacts such as mining. While prior research has examined the relationship between ESG performance and the cost of capital using broad cross-industry samples, there is limited evidence on whether ESG performance is significantly associated with required equity returns for investors in mining companies. This thesis addresses that gap by analysing the association between ESG scores and the cost of equity for publicly listed mining firms across five countries over a ten-year period. A quantitative analysis is conducted using panel regression models estimated with country-year fixed effects. The results show no statistically significant relationship between composite ESG scores, or individual E, S and G pillar scores, and mining firms' cost of equity. Overall, the findings suggest that, within this sample and period, equity investors in mining companies do not appear to systematically price ESG performance into their required equity returns.