The Impact of ESG Levels on Equity Asset Pricing: An Analysis Based on Multi-Factor and Extended Models

As China advances toward achieving its dual carbon goals, corporate ESG levels are increasingly gaining attention from investors. To provide investors with more empirical references for ESG-level investing, this paper incorporates corporate ESG levels as a new factor into the traditional Fama-French six-factor model. It examines the risk premium effect of the ESG factor while correcting the omission bias of the traditional six-factor model regarding market anomalies. Empirical results reveal a significant negative ESG factor premium effect in China's A-share market, contrasting with the U.S. market. This study deepens investor understanding of ESG levels and provides empirical evidence for relevant policy formulation.