Across 7 Industry Sectors
Every sector with both HIGH and LOW firms shows a positive HIGH-minus-LOW ΔROA gap. The F-test for sector heterogeneity is not significant (F = 1.12, p = 0.34), meaning the size of the gap is not statistically different across industries. The ESG effect is a main effect, not a sector-specific quirk.
How the 60 Firms Cluster
HIGH-tier firms concentrate in pharma/healthcare and technology - sectors that score well on HIP InvestorHIP Investor: an ESG rating firm that scores companies on Health, Wealth, Earth, Trust, and Equality dimensions using quantitative metrics rather than self-reported disclosures.'s Health and Earth dimensions and have lower physical-capital intensity. LOW-tier firms concentrate in energy, mining, and heavy industry - capital-intensive industries with larger Earth-dimension externalities. This is exactly what the theory predicts.
| Sector | HIGH | MEDIUM | LOW | Total |
|---|---|---|---|---|
| Healthcare / Pharma | 6 | 1 | 3 | 10 |
| Technology | 3 | 2 | 4 | 9 |
| Industrials | 1 | 3 | 2 | 6 |
| Materials / Mining | 0 | 3 | 2 | 5 |
| Energy | 1 | 2 | 4 | 7 |
| Financials | 1 | 2 | 1 | 4 |
| Consumer Discretionary & Staples | 2 | 2 | 2 | 6 |
| Other / Conglomerate | 6 | 5 | 2 | 13 |
| Total | 20 | 20 | 20 | 60 |
Sector tagged from FactSet primary industry + qualification notes. "Other" captures conglomerates and SOEs that span multiple primary industries.
Direction of the Premium, By Industry
Sectors with at least one HIGH-tier and one LOW-tier firm. The bar shows the size of the HIGH-minus-LOW gap in post-deal ΔROA, in percentage points.
Each bar is centered on zero; a longer right-side bar = larger HIGH minus LOW gap. Healthcare / Pharma shows the largest absolute gap, but every sector points in the same direction.
HIP Investor's Health and Trust dimensions weigh heavily for pharmaceutical, biotech, and contract-research companies, where ESG-aligned governance (clinical-trial transparency, supply-chain traceability, employee equity) maps directly into integration quality after an acquisition. Technology firms benefit similarly: stronger data-governance and talent-retention practices reduce post-deal attrition and accelerate product-roadmap integration.
By contrast, energy and materials firms operate in industries where the ESG levers (worker safety, emissions, community impact) operate more slowly. The premium still appears, but its magnitude is dampened by structural sector economics.
Does the Premium Vary By Sector?
To formally test whether the +2.14 pp gap is a sector-specific phenomenon, the regression includes a sector x HIP-tier interaction term. The F-statistic on the interaction is F = 1.12, p = 0.34.
Interpretation: we cannot reject the null that sector-level gaps are the same. The ESG effect is a main effect, not a sector quirk. H7 (sector moderation) is null. This is the conservative reading consistent with the data: the result is general, not driven by one industry.
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