We assess the performance of two quantitative signals based on ESG scores across a large, multi-national cross-section of European stock returns. We test whether the cost of equity capital is more influenced by the upward momentum (measured over time) of the ESG scores of the firms issuing stocks or by their stability (identified as the volatility of the scores over time), measured around a changing mean level. We find that short-term ESG momentum over 1 month has a significant impact on the cross-section of stock returns, lowering the anticipated cost of capital and leading to positive average abnormal returns. This suggests that short-term ESG momentum may represent a novel, priced systematic risk factor. Furthermore, we find strong evidence that an ESG volatility spread strategy which buys low ESG score volatility stocks and sells high volatility ones, generates a substantial alpha and affects the ex-ante cost of capital. Both quantitative ESG signals result in portfolio sorting and long-short strategies that enhance the overall sustainability profile of the issuing firms without compromising the raw average of their ESG scores.

中文翻译：

---

欧洲股票回报横截面中的新 ESG 评级驱动因素

我们根据欧洲股票回报的大型跨国横截面的 ESG 评分来评估两个定量信号的表现。我们测试股权资本成本是否更多地受到发行股票的公司 ESG 分数的上升势头（随着时间的推移衡量）的影响，还是受到其稳定性（确定为分数随时间的波动性）的影响，围绕变化的均值衡量等级。我们发现，超过1个月的短期ESG动量对股票横截面收益有显着影响，降低了预期资金成本，导致平均异常收益为正。这表明短期 ESG 势头可能代表一种新颖的、定价的系统性风险因素。此外，我们发现强有力的证据表明，买入 ESG 得分低波动性股票并卖出高波动性股票的 ESG 波动性价差策略会产生可观的阿尔法并影响事前资本成本。这两种定量 ESG 信号都会导致投资组合排序和多空策略，从而增强发行公司的整体可持续发展状况，而不影响其 ESG 分数的原始平均值。