Muted market reactions: the impact of esg announcements on stock returns and risk in the energy sector

This study investigates short-term financial market reactions to specific Environmental, Social, and Governance (ESG) announcements by energy sector companies. The central research question is whether positive and negative ESG events have a significant impact on companies’ cumulative abnormal stock returns (CARs) and market sensitivity (beta). The scientific relevance of the topic stems from the fact that most prior research has analysed the long-term effects of aggregate ESG scores, leaving the immediate market processing of discrete public announcements less explored. Its practical importance is driven by the energy industry’s sustainability transition and the growing prominence of ESG-focused investing. The research employs an event study methodology on 20 ESG events from ten traditional and renewable energy companies between 2020 and 2025, using OLS regression. The key findings indicate that the selected ESG announcements generally did not elicit statistically significant market reactions in terms of either returns or risk metrics. Initial significant results were not robust to changes in the market benchmark, suggesting nuanced, methodology-sensitive information processing by the market.