Sustainability and Stability: The Impact of ESG Ratings on Stock Price Volatility in India

Abstract

In recent years, Environmental, Social, and Governance (ESG) considerations have gained significant prominence in financial markets. Investors and corporations are increasingly recognizing that non-financial factors can influence a firm’s long-term performance and risk profile. ESG considerations directly impact investment strategies, with U.S. investors willing to pay up to 17 basis points higher for ESG-oriented index funds compared to non-ESG ones in 2020 (Baker et al., 2024).