Is ESG disclosure creating value propositions for the firms? An SLR and meta-analysis of how ESG affects the financials of a firm

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Abstract

This systematic literature review (SLR) delves into the evolving landscape of environmental, social, and governance (ESG) disclosures and their consequential effects on the financial performance of firms. As sustainability considerations increasingly influence investment decisions, corporations are compelled to integrate ESG factors into their reporting practices. The primary objective of this research is to comprehensively analyze existing literature, elucidating the patterns, trends, and key insights surrounding ESG disclosures and their repercussions on financial outcomes. The study employs a systematic approach to identify, evaluate, and synthesize pertinent research articles, academic papers, and industry reports. It explores the multifaceted dimensions of ESG disclosures, encompassing environmental stewardship, social responsibility, and governance practices. The analysis spans diverse sectors, examining how ESG reporting has become a crucial component of corporate transparency and stakeholder engagement. The review aims to distill overarching themes from the literature, providing a nuanced understanding of the relationship between ESG disclosures and financials. Preliminary findings suggest that ESG disclosures are positively associated with enhanced financial performance, fostering long-term value creation for firms. However, variations exist in the significance of these relationships across industries and regions. Furthermore, the review highlights the emergence of standardized frameworks and reporting guidelines as essential catalysts for advancing ESG disclosure practices. This research contributes to the ongoing dialogue on sustainable finance by consolidating diverse perspectives and methodologies found in the literature. The synthesis of existing knowledge seeks to inform future research directions, guide corporate practices, and assist policymakers in shaping frameworks that promote responsible and transparent business conduct. In total, 650 articles were reviewed to explore the effect the ESG disclosure has on the financial performance of the firms.

Keywords: ESG Disclosure, Financial Performance, Integrated Reporting, Sustainable Practices, Triple Bottom Line

Authors’ individual contribution: Conceptualization — S.K. and R.M.; Methodology — R.M.; Resources — S.K. and R.M.; Software — S.K. and R.M.; Formal Analysis — S.K. and R.M.; Writing — Original Draft — S.K. and R.M.; Writing — Review & Editing — S.K. and R.M.; Supervision — R.M.; Visualization — S.K. and R.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G41, E01, E16, Q56

Received: 20.11.2023
Accepted: 15.02.2024
Published online: 16.02.2024

How to cite this paper: Kalyani, S., & Mondal, R. (2024). Is ESG disclosure creating value propositions for the firms? An SLR and meta-analysis of how ESG affects the financials of a firm. Corporate Ownership & Control, 21(1), 96–117. https://doi.org/10.22495/cocv21i1art9