FROM RATINGS TO TWEETINGS: SUSTAINABILITY INFORMATION AND THE COST OF CAPITAL IN EUROPEAN MARKETS.

Abstract

This thesis investigates how sustainability information and climate‑related actions affect firms’ cost of capital across European equity and bond markets. It brings together three empirical chapters on: (i) ESG performance and the cost of equity, (ii) the corporate green bond market and its link to sovereign green bond issuance and firms’ ESG profiles, and (iii) climate communication on X (formerly Twitter) around COP26 and corporate bond yields. Chapter Three examines whether ESG performance lowers the cost of equity for European listed firms. The study employs two ESG providers, Refinitiv Eikon (paid) and Arabesque S‑Ray (free), and estimates implied costs of equity using standard valuation-based approaches that avoid reliance on ex-post returns. The sample covers 18 European countries from 2011 to 2021. Using firm-year fixed effects models, the study shows that higher ESG performance is associated with a lower cost of equity. Economic policy uncertainty weakens this relation and yields a U‑shaped pattern at high ESG levels. S‑Ray scores have larger explanatory power than Eikon. Chapter Four investigates the European corporate green bond market using Bloomberg data across 20 countries, from 2012 to 2022. An event study designed around each country’s first sovereign green bond shows sustained increases in corporate green bond counts and issuance volumes, with effects building over time and peaking about eight years post‑event. At the country-year level, corporate green bond spreads narrow in the first year after a sovereign’s entry. Using fixed effects regressions, the study reveals that issuers with stronger ESG profiles have lower bond spreads. Chapter Five explores whether climate-related communication on X reduces firms’ short‑term borrowing costs during COP26. The analysis uses FTSE 350 issuers, and tweets from those issuers over the 1st of September to the 31st of December 2021. A Climate Change Mention Index (CCMI) is built from authoritative sources and applied to daily firm‑level tweets. Panel regressions show that more intensive climate tweeting is associated with significant reductions in bond yields in short windows. To strengthen identification, the instrumental‑variables approach and propensity‑score matching with a triple-difference-in-difference design are employed. Climate‑related tweets by firms in high‑tweeting sectors during COP26 reduce yields relative to matched controls. Together, the evidence shows that investors reward credible sustainability activities and transparent dissemination. Strong ESG performance lowers the cost of equity and tightens green bond spreads, sovereign green bond issuance crowds in corporate green issuance and improves pricing, and timely climate communication around a high-attention event reduces corporate borrowing costs. These results inform firms’ financing and disclosure strategies and suggest that policymakers can foster market development through sovereign green issuance and by promoting comparable, decision‑useful disclosure across traditional ratings and newer digital channels.

Date of Award	17 Feb 2026
Original language	English
Awarding Institution	Bangor University
Supervisor	Rasha Alsakka (Supervisor) & Noemi Mantovan (Supervisor)