Sustainable Finance: ESG/CSR, Firm Value, and Investment Returns

Xin Chang*, Kangkang Fu, Yaling Jin, Pei Fun Liem

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


We review the burgeoning sustainable finance literature, emphasizing the value implications of ESG (environmental, social, and governance) and CSR (corporate social responsibility) practices. We use a discounted cash flow valuation framework to identify value drivers through which such practices can enhance firm value. Collectively, empirical evidence supports that they increase firm value by motivating employees, strengthening customer–supplier relationships, boosting long-term growth, increasing dividends, and reducing financing costs. Furthermore, more socially responsible firms deliver no 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 generate no higher risk-adjusted long-term returns than non-SRI funds. Finally, we briefly suggest several topics for future research on sustainable finance.

Original languageEnglish
Pages (from-to)325-371
Number of pages47
JournalAsia-Pacific Journal of Financial Studies
Issue number3
Publication statusPublished - Jun 2022

Scopus Subject Areas

  • Finance

User-Defined Keywords

  • Bond Returns
  • corporate social responsibility
  • CSR
  • ESG
  • Firm Value
  • Stock Returns
  • Sustainable Finance


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