Ramification of environmental social and governance performance on financial performance: Evidence from emerging market

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Abstract

This study aims to assess the degree of environmental, social, and governance (ESG) performance and its impact on selected companies’ financial performance (FP) in the emerging Indian market based on cross-sectional data collected from 528 listed companies in 2022. The ESG performance and FP data were collected from Credit Rating Information Services of India Limited (CRISIL) and annual reports. Correlation and ordinary least squares (OLS) regression have been applied for empirical exploration. The findings show that ESG performance in India is average, with a significant focus on governance and the least on environmental factors. The analysis indicates that ESG scores and individual dimensions (except social) significantly impact FP (Habib, 2022; Maji & Lohia, 2023). Findings provide evidence that ESG performance has a positive and significant impact on FP in emerging markets, highlighting the importance of integrating ESG considerations into business strategies and investment decisions. The findings of this study suggest prioritising ESG considerations to enhance FP and long-term sustainability, ESG performance should be integrated into investment analysis and decision-making processes and policymakers should establish and enforce ESG regulations to promote sustainable business practices.

Keywords: ESG Performance, Sustainability, Financial Performance, Financial and Nonfinancial Sector, Emerging Indian Market

Authors’ individual contribution: Conceptualization — P.D., H.D., and A.G.; Methodology — P.D., H.D., A.S., and R.K.; Software — P.D., M.D., D.S., and R.K.; Formal Analysis — P.D., H.D., A.G., S.D., and R.K.; Writing — Original Draft — P.D., H.D., A.G., and R.K.; Writing — Review & Editing — P.D., H.D., A.G., S.D., and R.K.; Visualization — P.D., H.D., and R.K.; Supervision — P.D., H.D., and M.D.

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

JEL Classification: M4, Q5, R5

Received: 30.04.2024
Revised: 09.09.2024; 02.10.2024; 25.03.2025
Accepted: 11.04.2025
Published online: 15.04.2025

How to cite this paper: Debnath, P., Debi, H., Goel, A., Das, M., Saha, A., Das, S., Sharma, D., & Kanoo, R. (2025). Ramification of environmental social and governance performance on financial performance: Evidence from emerging market. Journal of Governance & Regulation, 14(2), 58–69. https://doi.org/10.22495/jgrv14i2art6