Do Green M&A Really Improve ESG Performance? Multi-Year Econometric Evidence from the Energy Sector and Market Reaction Analysis

Recently, market attention to the environmental and social impact of companies has increased exponentially. Among the ways to combine financial and sustainability targets are Green M&A deals, extraordinary transactions driven by sustainable goals. While the majority of studies focus on the magnitude that ESG metrics have on these deals, this thesis seeks to explore this relationship in a bidirectional way, analysing green M&A’s effects on the acquiring company’s ESG scores. The study is built upon a database of 120 Green M&A deals in the Energy & Power sector, with a target specialising in Renewable Energy. The aim is twofold: to assess the evolution of the acquiring company's ESG score over time through a fixed-effects regression model, and to examine the short-term market reaction to the event using an event study market model. On the one hand, the evidences show a negative effect on the ESG score over the years, which could suggest the inability of rating agencies to “capture” the true sustainability of the deal, or difficulties in reconciling ESG and financial objectives. On the other hand, statistically significant negative abnormal returns in the market indicate an immediate and cautious response, possibly due to doubts about the nature of the transaction, its long-term effects, and the real corporate motivation. These findings enrich the discussion around sustainable finance by highlighting a misalignment between corporates’ goals, rating agencies' valuation and market assessment, and by calling for greater transparency, improved reporting, and standardized metrics.