The impact of Environmental, social, and governance (ESG) on risk-adjusted performance in the oil and gas sector in Europe

Lately, the Environmental, Social and Governance (ESG) elements has become more important within the stock market. The oil and gas industry is known as one of the worst industries when it comes to the ESG elements. In this research there will be looked at the impact of ESG variables on the risk-adjusted performance (RAP) of companies in the oil and gas industry in Europe. By using the Sharpe ratio variable as measurement for the RAP and using multiple criteria for the ESG elements, the impact of these ESG elements on the RAP is measured. This is done by first looking at the relationship between the two, using the Pearson correlation and secondly a regression analysis has been conducted. The results show that there is somewhat a form of correlation between the Sharpe ratio and the ESG variables. However, there is no significant proof that the ESG variables have impact on the Sharpe ratio and so the RAP within this research.