Do ESG factors improve utilities corporate efficiency and reduce the risk perceived by credit lending institutions? An empirical analysis

Abstract

In a changed scenario, characterized by great attention to environmental, social, and governance (ESG) factors, few industries feel the pressure more than utilities. The paper investigates, by employing a Data Envelopment Analysis (DEA) model, whether including ESG factors increases the efficiency of utilities companies and whether banks, by considering ESG ratings when selecting utilities companies, succeed in optimizing their portfolio. Our findings signal that ESG factors neither improve utilities efficiency nor constitute a useful complementary criterion for credit lending managers, provide useful suggestions for managers, regulators and academics.