ESG INVESTING AND STOCK MARKET EFFICIENCY IN THE TRANSITION TO SUSTAINABLE FINANCE

Анотація

The article examines the relationship between the proliferation of ESG (Environmental, Social, Governance) investing and stock market efficiency within the context of the global transition to sustainable finance. According to Bloomberg Intelligence, ESG assets under management exceeded $40 trillion in 2022, according to various estimates, were expected to exceed USD 50 trillion by 2025. The purpose of the study is to analyse the mechanisms through which ESG-oriented capital allocation affects market efficiency and to identify key trends in sustainable financial markets, including rating convergence and green bond market development. The research employs comparative analysis, the generalisation method, secondary data analysis, and critical analysis to evaluate the methodological limitations of existing research. The findings reveal that ESG investing creates additional informational signals that alter asset pricing, which can both enhance and impair informational market efficiency depending on the quality and consistency of ESG disclosures. An analysis of the efficient market hypothesis through the ESG lens indicates that non-financial information is increasingly priced into securities, challenging traditional assumptions about market efficiency. The study identifies and analyses the problem of ESG rating divergence and its impact on market informational efficiency: the correlation between major ESG rating providers is only 0.54, generating informational noise that distorts price signals. Companies with high ESG ratings demonstrate more resilient long-term financial performance, although short-term excess returns remain inconsistent. A conceptual model of the relationship between ESG factors and market efficiency is proposed. The results are applicable to institutional investors in ESG portfolio construction, capital market regulators in developing ESG disclosure standards, and corporate managers in building ESG strategies and non-financial risk management systems. Future research should focus on empirical analysis of the ESG-return nexus in emerging markets, particularly in Central and Eastern Europe, and on developing a unified approach to assessing ESG disclosure quality.

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