Risk of Shares of Companies With Strong ESG Practices

The objective of this study is to examine the risk of Brazilian publicly traded companies with strong ESG practices. All Brazilian listed companies with available data in the Economatica and Refinitiv Eikon databases were considered. Data on the disclosure of ESG practices were collected from the Refinitiv Eikon platform, separating companies that reported an ESG score from those that did not. Data on the beta coefficient, which represents the variation in companies’ stock prices, were obtained from the Economatica database. The data were analyzed using descriptive statistics and a t test for differences in means. The results indicate that companies that adopt and disclose ESG practices present, on average, higher risk than other firms. These findings contradict the theoretical expectation and the study hypothesis, since lower risk was not observed for ESG oriented firms. One possible explanation is that many of these companies operate in high risk regulated sectors and are therefore required to disclose certain ESG practices. Another possible reason is that the adoption of ESG practices may represent an attempt by firms already operating in risky sectors to mitigate their risk. From a theoretical perspective, the study contributes by clarifying the relationship between risk and ESG in Brazil, complementing the literature with counterintuitive evidence. From a practical perspective, it assists economic agents in assessing the volatility of sustainable assets and fosters social debate on the effectiveness of corporate ESG practices.