ESG/CSR, Value, Returns

We review the burgeoning sustainable finance literature, emphasizing the value implications of ESG/CSR. We use a discounted cash flow valuation framework to identify value drivers through which ESG/CSR can enhance firm value. Collectively, empirical evidence supports that ESG/CSR increases value by motivating employees, strengthening customer/supplier relationships, boosting long-term growth, increasing dividends, and reducing financing costs. Furthermore, more socially responsible firms do not deliver higher excess stock returns in the long run. Green bonds neither provide issuers with a price premium nor make investors sacrifice on lower returns. Socially responsible investing (SRI) funds do not generate higher riskadjusted long-term returns than non-SRI funds. Finally, we briefly suggest several topics for future research on sustainable finance. KCI Citation Count: 0