Materiality investor perspectives on utilities’ ESG performance. An empirical analysis of ESG factors and cost of equity

The last years have seen significant growth in the demands and use of Environmental, Social, and Governance (ESG) data and ratings, which have relevant market implications and affect the value of firms based on prior evidence. However, little is known about the materiality of ESG factors to investors’ risk perceptions. This paper contributes to this debate by analyzing the relationship between the ESG performance of utility companies and the cost of equity capital. Using fixed-effect panel regressions on a sample of 273 firm-year observations between 2017 and 2021, this paper provides novel insights with significant theoretical and practical implications.