Índice de sustentabilidade empresarial (ISE) e custo de capital das empresas listadas na B3

Abstract

This study aims to understand whether companies participating in the Sustainability Index at B3 (ISE) experience benefits in their cost of capital. The literature shows that there is no consolidated understanding of this subject in the academic realm, yielding divergent results regarding the relationship between sustainability and cost of capital. Our sample comprises the list of ISE companies between 2005 and 2023, as well as other companies listed on B3, used as controls. We analyze the shock of inclusions and exclusions of ISE companies concerning the cost of capital. Additionally, we employ a Regression-Discontinuity Design (RDD) to observe companies that almost entered the index compared to those that just entered. Most of the results point to a negative and significant relationship for inclusion events of companies in the ISE, and some of them demonstrate a positive and significant relationship for index exclusions, indicating that firms experience lower cost of capital when entering the sustainability index. However, though the RDD analysis indicates firms cost of capital decreases around inclusions in the index, the results are not statistically significant. Therefore, the results align with the researchs hypothesis that ISE membership brings positive consequences to the cost of capital, however, due to low data availability and the consequent high estimation error, the results are not to be trusted. Taken together, the results point towards the relationship between the cost of capital and ISE membership, consistent with the hypothesis of perceived benefits by the providers of capital, however, we could not find causal effects between ISE membership and the cost of capital.