How to explain stock returns of utility companies from an environmental, social and corporate governance perspective.

Sustainability is a major challenge in today's business world, making environmental, social and governance criteria an indispensable tool for business management and investment decisions. Using 2020 data of 47 companies from the STOXX Europe Total Market Utilities Index and qualitative comparative analysis, this study aims to analyse how the combination of CO2 equivalent emissions, sustainability compensation incentives, environmental investments, environment management training, and policy fair competition leads to utility companies' stock market returns. Two subsample models (electricity and non‐electricity utilities) have been considered in the study. The results point to the absence of CO2 equivalent emissions, the absence of incentives, and the presence of environmental investment as key variables to lead to stock market returns. The findings provide relevant information for managers and practitioners of utilities industry to achieve improvements in the environmental, social and governance management practices, maintaining profitability in financial markets and facilitating decision‐making for investors. [ABSTRACT FROM AUTHOR]