BEYOND TRADITIONAL METRICS: ESG AND FINANCIAL PERFORMANCE IN INNOVATION-DRIVEN SECTORS

Annalisa Ferrari, Federico Cini and Rosella Castellano
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Annalisa Ferrari: Department of Law and Economics, University of Roma Unitelma Sapienza, Piazza Sassari 4, Roma 00161, Italy
Federico Cini: ��PhD School in Social Sciences and Economics, Sapienza University of Rome, Piazzale Aldo Moro 5, Roma 00185, Italy
Rosella Castellano: ��Department of Law and Digital Society, University of Roma Unitelma Sapienza, Piazza Sassari 4, Roma 00161, Italy

Journal of Financial Management, Markets and Institutions (JFMMI), 2025, vol. 13, issue 01, 1-23

Abstract: This study explores the relationship between Environmental, Social, and Governance (ESG) ratings and financial performance within technology-intensive sectors. Although the link between ESG factors and financial performance is widely recognized, its specific relevance to the Technology and Telecommunications sector, which is innovation-driven and has unique characteristics compared to traditional industries, remains largely unexplored. Financial performance is assessed using two key metrics: Return on Investment (ROI) and Conditional Beta (BETA). The dataset comprises a basket of firms listed in the Euro Stoxx 600 index for the period 2016–2021. Employing a Machine Learning approach and SHapley Additive exPlanations (SHAP) values for model interpretability, the study, leveraging covariate analysis, uncovers patterns and reveals how ESG factors contribute to shaping financial outcomes. The findings suggest that ESG considerations, particularly Social(S) factors, are important in driving financial performance in high-growth, innovation-driven companies.

Keywords: ESG ratings; financial performance; technology-intensive companies; machine learning (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1142/S2282717X2550001X

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