Does Company Green Score Affect Stock Price?

Do investors reward green companies by paying a higher than the equilibrium price indicated by the capital-asset pricing models? Or do they penalize green companies by paying a less than the equilibrium price because going green and keeping green is costly and reduces company profits? In this study, we seek an answer to these questions by using the green scores published by Newsweek magazine for the S&P 500 companies in 2012. We use the parameters of the Fama-French three-factor capital-asset-pricing model as control variables in multivariate linear regressions to assess the impact of company green score on stock price. We use the event-study methodology to test our hypothesis with one-week, four-week, and ten-week event windows after the publication of the company green scores by Newsweek. Our findings indicate that a company's green score is not priced by the market and that the variation between companies in terms of their green scores cannot explain the variation between their stock returns