Does materiality matter in ESG investing?

Salma Ben Amor and Maher Kooli

Research in International Business and Finance, 2025, vol. 79, issue C

Abstract: This study contributes to the environmental, social, and governance (ESG) literature by addressing the role of materiality in financial performance, an area that has received relatively little empirical attention in the Canadian context. Using panel data from all Canadian S&P/TSX Composite Index firms from 2010 to 2022, our findings suggest that not all ESG issues are of equal significance, and materiality is a critical determinant. Specifically, we demonstrate a positive and significant association between a firm’s ESG materiality score and financial performance, whereas immaterial ESG issues exhibit either no significant impact or a negative relationship with firm performance. Furthermore, using a quantile regression framework, we highlight the pivotal role of disclosing material ESG issues in explaining variations in profitability and firm value across different performance levels.

Keywords: Environment; Social; Governance; ESG; profitability; Firm value; Tobin's Q (search for similar items in EconPapers)
JEL-codes: C33 G3 G32 G34 L25 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:79:y:2025:i:c:s0275531925003617

DOI: 10.1016/j.ribaf.2025.103105

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