The ESG Disclosure Premium

Do firms benefit from reporting sustainability information? We find that firms that initiate disclosure of environmental, social, and governance (ESG) metrics enjoy higher equity valuation today. Disclosing any of the eight key environmental and social quantitative measures that we identify in this article lowers firms’ cost of equity. The positive disclosure premium has increased over time and even turned from negative to positive in North America and emerging markets, particularly after the 2015 Paris Agreement. We identify differentiated rewards for disclosure initiation across sectors and reports current disclosure achievements—or lack thereof. We pinpoint substantial room for progress, specifically in emerging markets and less carbon-intensive sectors. This mapping points to areas of potentially fruitful engagement between firms and investors that would benefit all stakeholders.