May 2026
After an initial optimism for the role of the stock market in the transition to the Green Economy following the Paris Climate Accords, with corresponding focus on sustainability and ESG issues by institutional investors, the ESG agenda has had some recent knocks. The war in Ukraine and the ``war on woke'' by the US Trump administration are the most obvious examples. In this paper we investigate these issues. We use data from the Nordic Stock Markets, to first investigate stock market listings (IPOs), and find that high quality ESG (green) firms are issued at better terms. However, coinciding with the onset of the Ukrainian war, green IPOs dry up. To investigate whether this can be due to less willingness to fund green investments, we look at the cost of capital for existing firms. Here too we find that in the period from 2018 to the onset of the war in Ukraine, ESG properties matter for the crossection of returns, but, immediately after the start of the war, ESG ceases to matter
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We investigate whether the sustainability profile of a firm affects the terms at which the firm list on a stock market. Given the evidence that sustainable firms have a lower cost of capital, we expect this to also be reflected in the issue terms at an IPO. The laboratory for our investigation is stock listings (IPOs) at Euronext Oslo. We find that firms which emphasize environmental issues in their prospectus have lower implied cost of capital. We find no link between the degree of (first day) underpricing and environmental issues. We also provide evidence on recent changes in the IPO landscape, where pure listings are becoming more common, and stock exchanges introduce tiered markets that attract younger and smaller companies.
Keywords: IPO; Cost of Capital; Underpricing; ESG; Euronext Oslo
JEL Codes: G12; G24; G30
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