ESG Performance Relation with Financial Performance

Zhiyang Lin ()
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Zhiyang Lin: Guangdong University of Foreign Studies, Guangzhou Higher Education Mega Center

A chapter in Proceedings of the 2025 3rd International Academic Conference on Management Innovation and Economic Development (MIED 2025), 2025, pp 335-349 from Springer

Abstract: Abstract As businesses realize the potential influence on long-term financial sustainability and value creation, the incorporation of Environmental, Social, and Governance (ESG) elements into corporate strategy has grown in importance. The objective of this study is to examine the relationship between ESG performance and financial performance, with particular emphasis on the renewable energy sector. Using a mixed-methods approach, the research employs panel data analysis and qualitative case studies. The sample includes publicly traded renewable energy companies listed in the United States and Europe from 2015 to 2024, with data sourced from MSCI ESG ratings and financial statements. The findings reveal a significant positive correlation between ESG performance and financial performance, attributable to enhanced operational efficiency and effective stakeholder engagement. The study reaches the conclusion that ESG performance is a core determinant of long-term financial prosperity and sustainable value enhancement, further emphasizing the mediating function of agency costs and financing constraints. These findings imply that incorporating ESG practices into corporate strategy can lower risks and improve financial credibility. Future research could further explore the mechanisms and contexts influencing this relationship across different sectors and regions.

Keywords: ESG Performance; Financial Performance; Regression Analysis (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-835-6_36

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DOI: 10.2991/978-94-6463-835-6_36

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