Does sustainable finance contribute to companies’ profitability? Evidence from US companies

Alyssa Desvarieux and Taoufik Bouraoui
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Alyssa Desvarieux: Rennes SB - Rennes School of Business
Taoufik Bouraoui: Rennes SB - Rennes School of Business

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Abstract: This article analyzes the impact of ESG (Environmental, Social and Governance) performance on US companies' profitability. We used as proxies CO2 emissions for the environmental component, job satisfaction and gender pay gap for the social pillar, and ethnic diversity on board for the governance pillar. We implemented a Vector Error Correction Model (VECM) using monthly data during the period from December 2008 to January 2022. Our results reveal that, in the long-term, increasing ethnic diversity on board and reducing gender pay gap contribute to an enhancement in profitability. However, in the short-term, companies' financial performance is found to be affected positively by CO2 emissions and negatively by ethnic diversity on board. Overall, the potential for increased company's performance and the well-being of society when ESG considerations are effectively integrated into corporate strategies should encourage companies to include ESG practices into their business models.

Keywords: Sustainable finance profitability ESG Vector Error Correction Model; Vector Error Correction Model; ESG; profitability; Sustainable finance (search for similar items in EconPapers)
Date: 2026-06-01
New Economics Papers: this item is included in nep-mid
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Published in International Journal of Research in Finance and Management, 2026, 9 (6), pp.93-102. ⟨10.33545/26175754.2026.v9.i6a.827⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05743284

DOI: 10.33545/26175754.2026.v9.i6a.827

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