Valuing Sustainability: An Empirical Analysis of ESG Risk and Financial Performance in the Global Transportation Sector

Abstract

Henry Efe Onomakpo Onomakpo*

The global transportation sector faces pressing sustainability challenges, driving interest in Environmental, Social, and Gov- ernance (ESG) factors, yet empirical evidence on ESG's financial impact in this capital-intensive sector is limited. This study examines the relationship between corporate ESG risk scores (Sustainalytics) and excess stock returns for global transportation firms, controlling for Fama-French 6 factors via panel regression (2015–2024, ESG analysis post-Nov 2019). Findings are con- textualized within a Global Sustainable Transportation System (GSTS) framework. Empirical results show that while financial factors explain returns, no statistically significant relationship was found between overall or pillar ESG risk scores and excess stock returns for Low or medium-ESG-risk firms during the analyzed period. High-risk firm analysis was inconclusive due to data limitations. Although the GSTS vision stresses sustainability, these findings suggest current broad ESG scores did not significantly impact short-term, risk-adjusted returns beyond traditional factors, highlighting potential gaps between long-term sustainability value and immediate market pricing.

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