THE IMPACT OF ENVIRONMENTAL PERFORMANCE ON FIRM VALUATION : An empirical study based on environmental scores in Sweden

This study examines the relationship between environmental performance and valuationof listed companies in Sweden. In a context where environmental challenges take anincreasing importance in financial decisions, the objective is to assess if a betterenvironmental performance, measured by the E score from Refinitiv ESG, positivelyinfluence the market valuation, measured through the price-to-book ratio and the Tobin’sQ ratio.The analysis relies on a panel of 87 Swedish companies on the 2018-2023 period. OLSand fixed effects regression models were used to evaluate the robustness of the results.Diagnostic tests reveal the presence of heteroskedasticity, which justifies the use of robuststandard errors.The results do not indicate any statistically significant direct link between environmentalperformance and market valuation. However, certain control variables such as the size ofthe company and profitability present significant effects on valuation ratios. Those resultssuggest that, although environmental performance is a growing preoccupation, it still doesnot convert clearly in the valuation of Swedish companies for the time period studied.The study contributes to the literature on sustainable finance by bringing some elementson the debate of the financial materiality of environmental criteria. Future research couldexplore lagged effects over time or sectorial differences.