ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (“ESG”) PERFORMANCE AND FINANCIAL OUTCOMES: ANALYZING THE IMPACT OF “ESG” ON “FINANCIAL PERFORMANCE”
Keywords:
Environmental, Social, Governance , Financial Performance Sustainability Development, Socially Responsible Investments, Corporate GovernanceAbstract
Consideration of “Environmental, social, and governance (“ESG”)” has increased importance for the “financial performance” and financial market and it serves as a corporate manifestation of sector sustainable development, most corporate leaders accept the concern of “ESG” as a significant approach to enhance its ““financial performance””. The practices of “ESG” factors also contribute to a better dynamic of cost management, innovation and employee retention that further leads to a more sustainable prospect for long-term growth. “ESG” performance has contributed towards the growth of “financial performance” through influencing investment decisions on “ESG” scoring firms among investors as well as contributing towards the inclination of firms to opt for social responsibility and environmental performance as well as corporate governance as a means for securing the support and investment participation of prospective investors and stakeholders. The study also implied sustainability funding and socially responsible investments and funding such as the ETF not only being limited towards investment contribution but also is included into the “financial performance” such as through investment and socially responsible funding assets and returns. Therefore, it could be considered that “ESG” performance has a positive and noteworthy influence over “financial performance” through a financial and non-financial parameters and integrations into businesses that shape the market value and “financial performance” of the forms due to the aspect of high “ESG” scoring firms having and upper hand in sustainability development within the firm and contribution towards sustainability in environment and society.
References
Ahmad, N., Mobarek, A. and Roni, N.N., 2021. Revisiting the impact of ESG on financial performance of FTSE350 UK firms: Static and dynamic panel data analysis. Cogent Business & Management, 8(1), p.1900500.
Aich, S., Thakur, A., Nanda, D., Tripathy, S. and Kim, H.C., 2021. Factors affecting ESG towards impact on investment: A structural approach. Sustainability, 13(19), p.10868.
Alareeni, B.A. and Hamdan, A., 2020. ESG impact on performance of US S&P 500-listed firms. Corporate Governance: The International Journal of Business in Society, 20(7), pp.1409-1428.
Aydoğmuş, M., Gülay, G. and Ergun, K., 2022. Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22, pp.S119-S127.
Bani-Harouni, N., Hommel, U. and Paetzold, F., 2023. ESG Footprints in Private Equity Portfolios: Unpacking Management Instruments and Financial Performance. Available at SSRN 4627273.
Dragomir, V.D., Bătae, O.M., Ionescu, B.Ș. and Ionescu-Feleagă, L., 2022. THE INFLUENCE OF ESG FACTORS ON FINANCIAL PERFORMANCE IN THE BANKING SECTOR DURING THE COVID-19 PANDEMIC. Economic Computation & Economic Cybernetics Studies & Research, 56(4), pp.71-88.
Egorova, A.A., Grishunin, S.V. and Karminsky, A.M., 2022. The Impact of ESG factors on the performance of Information Technology Companies. Procedia Computer Science, 199, pp.339-345.
Fu, T., and Li, J.. 2023. An empirical analysis of the impact of ESG on financial performance: the moderating role of digital transformation. Frontiers in Environmental Science, 11, p.1256052.
Gao, W., Li, M. and Zou, C., 2022. [Retracted] Analysis of the Impact of ESG on Corporate Financial Performance under the Epidemic Based on Static and Dynamic Panel Data. Wireless Communications and Mobile Computing, 2022(1), p.6851518.
Hornuf, L. and Yüksel, G., 2024. The performance of socially responsible investments: A meta‐analysis. European Financial Management, 30(2), pp.1012-1061.
Hu, A., Yuan, X., Fan, S. and Wang, S., 2023. The impact and mechanism of corporate ESG construction on the efficiency of regional green economy: an empirical analysis based on signal transmission theory and stakeholder theory. Sustainability, 15(17), p.13236.
Hwang, J., Kim, H. and Jung, D., 2021. The effect of ESG activities on financial performance during the COVID-19 pandemic—Evidence from Korea. Sustainability, 13(20), p.11362.
Junius, D., Adisurjo, A., Rijanto, Y.A. and Adelina, Y.E., 2020. The impact of ESG performance to firm performance and market value. Jurnal Aplikasi Akuntansi, 5(1), pp.21-41.
Koundouri, P., Pittis, N. and Plataniotis, A., 2022. The impact of ESG performance on the financial performance of European area companies: An empirical examination. Environmental Sciences Proceedings, 15(1), p.13.
Landi, G.C., Turriziani, L., Muto, V. and Ricciardi, I., 2024. Exploring the nexus between ESG risk variations and investment preferences: Insights from sustainable ETFs during the COVID-19 era. Socio-Economic Planning Sciences, 95, p.102039.
Naeem, N. and Çankaya, S., 2022. The impact of ESG performance over financial performance: A study on global energy and power generation companies. International Journal of Commerce and
Finance, 8(1), pp.1-25.
Rompotis, G.G., 2023. The Performance of ESG ETFs in the US. Capital Markets Review, 31(2), pp.89-101.
Saygili, E., Arslan, S. and Birkan, A.O., 2022. ESG practices and corporate financial performance: Evidence from Borsa Istanbul. Borsa Istanbul Review, 22(3), pp.525-533.
Shin, J., Moon, J.J. and Kang, J., 2023. Where does ESG pay? The role of national culture in moderating the relationship between ESG performance and financial performance. International Business Review, 32(3), p.102071.
Statista.com, 2022. Italy: socially responsible investments (SRI) and financial performance 2017 | Statista. [Online] Available at: https://proxy.parisjc.edu:8293/statistics/791196/socially-responsible-investments-sri-and-a-company-s-financial-performance-in-italy/ [Accessed on: 25th Nov,
.
Statista.com, 2024. ESG drivers impacting investment decisions worldwide 2023, by region. [Online] Available at: https://www.statista.com/statistics/1454565/esg-drivers-impacting-investment-decisions-worldwide/ [Accessed on: 25th Nov, 2024].
Statista.com, 2024. ESG ETF assets 2023 | Statista. [Online] Available at: https://www.statista.com/statistics/1297487/assets-of-esg-etfs-worldwide/ [Accessed on: 25th Nov, 2024].
Statista.com, 2024. Europe: impact of ESG on PE firm's financial performance | Statista. [Online] Available at: https://www.statista.com/statistics/1534785/impacts-of-esg-performance-on-pe-firm-s-financial-performance-europe/ [Accessed on: 25th Nov, 2024].
Statista.com, 2024. S&P 500: ESG vs normal index comparison 2024 | Statista. [Online] Available at: https://proxy.parisjc.edu:8293/statistics/1269643/s-p-500-esg-normal-index-comparison/ [Accessed on: 25th Nov, 2024].
Statista.com, 2024. Share investors increasing ESG ETF allocation US, Europe, and China
[Online] Available at: https://www.statista.com/statistics/1191755/esg-etf-increased-investment-next-year-worldwide/ [Accessed on: 25th Nov, 2024].
Zhou, G., Liu, L. and Luo, S., 2022. Sustainable development, ESG performance and company market value: Mediating effect of financial performance. Business Strategy and the Environment, 31(7), pp.3371-3387.
Published
Issue
Section
License
Copyright (c) 2024 Kshitij Bansal (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
