[ Log In | Register]
! Skip Navigation Links
Skip Navigation Links
Image of Journal of Applied Nonlinear Dynamics
ISSN:2325-6192 (print)
ISSN:2325-6206 (online)
Journal of Environmental Accounting and Management
António Mendes Lopes (editor), Jiazhong Zhang(editor)
António Mendes Lopes (editor)

University of Porto, Portugal

Email: aml@fe.up.pt

Jiazhong Zhang (editor)

School of Energy and Power Engineering, Xi'an Jiaotong University, Xi'an, Shaanxi Province 710049, China

Fax: +86 29 82668723 Email: jzzhang@mail.xjtu.edu.cn

Unveiling the Financial Impact of Sustainability: A Comprehensive Analysis of ESG Scores and Their Relationship with Corporate Performance

Journal of Environmental Accounting and Management 14(3) (2026) 441--458 | DOI:10.5890/JEAM.2026.09.005

Omar Senhaji, Guillermo Mateu-Bartolomé

Department of Accounting, University of Valencia. Economics Faculty. Av. Tarongers SN, 46022 Valencia (Spain)

Download Full Text PDF

 

Abstract

In this paper, we examine how environmental, social, and governance (ESG) strategy affects company's financial performance. Businesses have increasingly prioritized ESG factors as public concern about social inequality and climate change has grown. However, the extent of this impact on financial performance remains disputed. While some studies suggest a positive relationship, others argue for potential adverse effects, or no significant effects at all. Using French listed companies as data points, this research explores the joint and independent effects of the three ESG pillars on corporate financial performance, integrating rational choice theory to provide a fresh perspective in this academic debate. We found a statistically significant negative relationship between governance scores and financial performance, while the environmental and social scores have no significant effect. Overall, this study offers empirical evidence on ESG strategies to guide decision-making in sustainable business practices and policy formulation.

Acknowledgments

The authors would like to thank the three anonymous referees and the editor for their insightful comments and constructive suggestions, which have significantly improved the quality and clarity of this paper.

References

  1. [1]  Schoenmaker, D. and Schramade, W. (2018), Principles of sustainable finance, OUP Oxford. https://books.google.nl/ books?id=Hst-DwAAQBAJ
  2. [2]  Schoenmaker, D. and Schramade, W. (2018), Principles of sustainable finance, OUP Oxford. https://books.google.nl/ books?id=Hst-DwAAQBAJ
  3. [3]  Liu, P., Zhu, B., Yang, M., and Chu, X. (2022), ESG and financial performance: A qualitative comparative analysis in China’s new energy companies, Journal of Cleaner Production, 379, 134721. https://doi.org/10.1016/ j.jclepro.2022.134721
  4. [4]  Brooks, C. and Oikonomou, I. (2018), The effects of environmental, social and governance disclosures and performance on firm value: A review of the literature in accounting and finance, The British Accounting Review, 50(1), 1-15. https://doi.org/10.1016/j.bar.2017.11.005
  5. [5]  Duque-Grisales, E. and Aguilera-Caracuel, J. (2021), Environmental, social and governance (ESG) scores and financial performance of multilatinas: moderating effects of geographic international diversification and financial slack, Journal of Business Ethics, 168(2), 315-334. https://doi.org/10.1007/s10551-019-04177-w
  6. [6]  Vasileiou, E., Georgantzis, N., Attanasi, G., and Llerena, P. (2022), Green innovation and financial performance: A study on Italian firms, Research Policy, 51(6), 104530. https://doi.org/10.1016/j.respol.2022.104530
  7. [7]  Hill, J. (2020), Environmental, social, and governance (ESG) investing: A balanced analysis of the theory and practice of a sustainable portfolio, Elsevier Science. https://books.google.nl/books?id=y8i2DwAAQBAJ
  8. [8]  Gillan, S.L., Koch, A., and Starks, L.T. (2021), Firms and social responsibility: A review of ESG and CSR research in corporate finance, Journal of Corporate Finance, 66, 101889. https://doi.org/10.1016/j.jcorpfin.2021.101889
  9. [9]  Esty, D.C. and Cort, T. (2020), Values at work: Sustainable investing and ESG reporting, Springer International Publishing. https://books.google.nl/books?id=TkwFEAAAQBAJ
  10. [10]  Hill, J. (2020), Environmental, social, and governance (ESG) investing: A balanced analysis of the theory and practice of a sustainable portfolio, Elsevier Science. https://books.google.nl/books?id=y8i2DwAAQBAJ
  11. [11]  Bloomberg (2020), Environmental and social scores methodology and field information, Bloomberg ESG Terminal Report.
  12. [12]  Gillan, S.L., Koch, A., and Starks, L.T. (2021), Firms and social responsibility: A review of ESG and CSR research in corporate finance, Journal of Corporate Finance, 66, 101889. https://doi.org/10.1016/j.jcorpfin.2021.101889
  13. [13]  Yoo, S. and Managi, S. (2022), Disclosure or action: Evaluating ESG behaviour towards financial performance, Finance Research Letters, 44, 102108. https://doi.org/10.1016/j.frl.2021.102108
  14. [14]  Esty, D.C. and Cort, T. (2020), Values at work: Sustainable investing and ESG reporting, Springer International Publishing. https://books.google.nl/books?id=TkwFEAAAQBAJ
  15. [15]  Bose, S. (2020), Evolution of ESG reporting frameworks, in Daniel C. Esty and Todd Cort (Eds.), Values at Work: Sustainable Investing and ESG Reporting, 13-33. https://doi.org/10.1007/978-3-030-55613-6_2
  16. [16]  Bose, S. (2020), Evolution of ESG reporting frameworks, in Daniel C. Esty and Todd Cort (Eds.), Values at Work: Sustainable Investing and ESG Reporting, 13-33. https://doi.org/10.1007/978-3-030-55613-6_2
  17. [17]  Friede, G., Busch, T., and Bassen, A. (2015), ESG and financial performance: Aggregated evidence from more than 2000 empirical studies, Journal of Sustainable Finance & Investment, 5(4), 210-233. DOI:10.1080/20430795. 2015.1118917
  18. [18]  Li, S., Ngniatedema, T., and Chen, F. (2017), Understanding the impact of green initiatives and green performance on financial performance in the US, Business Strategy and the Environment, 26(6), 776-790. https://doi.org/ 10.1002/bse.1948
  19. [19]  Orlitzky, M., Schmidt, F.L., and Rynes, S.L. (2003), Corporate social and financial performance: A meta-analysis, Organization Studies, 24(3), 403-441. https://doi.org/10.1177/0170840603024003910
  20. [20]  Eccles, R.G. and Serafeim, G. (2013), The performance frontier: Innovating for a sustainable strategy, Harvard Business Review, 91(5), 50-60. https://doi.org/10.4337/9781839101328.00007
  21. [21]  Clarkson, P.M., Fang, X., Li, Y., and Richardson, G.D. (2013), The relevance of environmental disclosures: Are such disclosures incrementally informative? Journal of Accounting and Public Policy, 32(5), 410-431. https://doi.org/ 10.1016/j.jaccpubpol.2013.06.008
  22. [22]  Li, Y., Gong, M., Zhang, X.-Y., and Koh, L. (2018), The impact of environmental, social, and governance disclosure on firm value: The role of CEO power, The British Accounting Review, 50(1), 60-75. https://doi.org/10.1016/ j.bar.2017.09.007
  23. [23]  Bruna, M.G., Loprevite, S., Raucci, D., Ricca, B., and Rupo, D. (2022), Investigating the marginal impact of ESG results on corporate financial performance, Finance Research Letters, 47, 102828. https://doi.org/10.1016/ j.frl.2022.102828
  24. [24]  Chen, Z. and Xie, G. (2022), ESG disclosure and financial performance: Moderating role of ESG investors, International Review of Financial Analysis, 83, 102291. https://doi.org/10.1016/j.irfa.2022.102291
  25. [25]  Ioannou, I. and Serafeim, G. (2019), The consequences of mandatory corporate sustainability reporting, in Abagail McWilliams, Deborah E. Rupp, Donald S. Siegel, Günter K. Stahl, and David A. Waldman (Eds.), The Oxford Handbook of Corporate Social Responsibility: Psychological and Organizational Perspectives, 452-489. Oxford University Press.
  26. [26]  Iwata, H. and Okada, K. (2011), How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms, Ecological Economics, 70(9), 1691-1700. https://doi.org/10.1016/j.ecolecon. 2011.05.010
  27. [27]  Liu, P., Zhu, B., Yang, M., and Chu, X. (2022), ESG and financial performance: A qualitative comparative analysis in China’s new energy companies, Journal of Cleaner Production, 379, 134721. https://doi.org/10.1016/j.jclepro. 2022.134721
  28. [28]  Nelling, E. and Webb, E. (2009), Corporate social responsibility and financial performance: The ``virtuous circle'' revisited, Review of Quantitative Finance and Accounting, 32(2), 197-209. https://doi.org/10.1007/s11156-008-0090-y
  29. [29]  Humphrey, J.E., Lee, D.D., and Shen, Y. (2012), The independent effects of environmental, social and governance initiatives on the performance of UK firms, Australian Journal of Management, 37(2), 135-151. https://doi.org/10.1177/ 0312896211410081
  30. [30]  Duque-Grisales, E. and Aguilera-Caracuel, J. (2021), Environmental, social and governance (ESG) scores and financial performance of multilatinas: Moderating effects of geographic international diversification and financial slack, Journal of Business Ethics, 168(2), 315-334. https://doi.org/10.1007/s10551-019-04177-w
  31. [31]  Wang, C. (2024), The relationship between ESG performance and corporate performance—Based on stakeholder theory, SHS Web of Conferences, 190, 03022. https://doi.org/10.1051/shsconf/202419003022
  32. [32]  Potharla, S. and Dissanayake, H. (2022), Theoretical clustering in ESG research: A review of stakeholder theory, The Empirical Economics Letters, 21, 131-143. https://doi.org/10.5281/zenodo.7757701
  33. [33]  Ambler, T. and Wilson, A. (2006), Problems of stakeholder theory, Business Ethics: A European Review, 4, 30-35. https://doi.org/10.1111/j.1467-8608.1995.tb00107.x
  34. [34]  Malecki, C. (2024), Sustainable corporate governance: The French approach, Environmental Liability 28(3). Available at SSRN: https://ssrn.com/abstract=4782773
  35. [35]  Pietrancosta, A. (2022), Codification in company law of general CSR requirements: Pioneering recent French reforms and EU perspectives, European Corporate Governance Institute - Law Working Paper No. 639/2022. Available at SSRN: https://ssrn.com/abstract=4083398 or http://dx.doi.org/10.2139/ssrn.4083398
  36. [36]  Li, Y., Gong, M., Zhang, X.-Y., and Koh, L. (2018), The impact of environmental, social, and governance disclosure on firm value: The role of CEO power, The British Accounting Review, 50(1), 60-75. https://doi.org/10.1016/ j.bar.2017.09.007
  37. [37]  Bloomberg (2022), Governance scores methodology and field information, Bloomberg ESG Terminal Report.
  38. [38]  Bloomberg (2020), Environmental and social scores methodology and field information, Bloomberg ESG Terminal Report.
  39. [39]  Bloomberg (2022), Governance scores methodology and field information, Bloomberg ESG Terminal Report.
  40. [40]  Bloomberg (2022), Governance scores methodology and field information, Bloomberg ESG Terminal Report.
  41. [41]  Li, Y., Gong, M., Zhang, X.-Y., and Koh, L. (2018), The impact of environmental, social, and governance disclosure on firm value: The role of CEO power, The British Accounting Review, 50(1), 60-75. https://doi.org/10.1016/ j.bar.2017.09.007
  42. [42]  Bruna, M.G., Loprevite, S., Raucci, D., Ricca, B., and Rupo, D. (2022), Investigating the marginal impact of ESG results on corporate financial performance, Finance Research Letters, 47, 102828. https://doi.org/10.1016/ j.frl.2022.102828
  43. [43]  Becker, G.S. (1976), The economic approach to human behavior, University of Chicago Press.
  44. [44]  Hargrave, M. (2022), Return on assets (ROA): Formula and ``good'' ROA defined, Investopedia. https://www.investopedia.com/terms/r/returnonassets.asp
  45. [45]  Deutsch, E. (2012), Econometric modeling, in S.J. Smith (Ed.), International Encyclopedia of Housing and Home, 12-25. https://doi.org/10.1016/B978-0-08-047163-1.00665-2
  46. [46]  Chen, Z. and Xie, G. (2022), ESG disclosure and financial performance: Moderating role of ESG investors, International Review of Financial Analysis, 83, 102291. https://doi.org/10.1016/j.irfa.2022.102291
  47. [47]  Nelling, E. and Webb, E. (2009), Corporate social responsibility and financial performance: The ``virtuous circle'' revisited, Review of Quantitative Finance and Accounting, 32(2), 197-209. https://doi.org/10.1007/s11156-008-0090-y
  48. [48]  Laird, N.M. and Ware, J.H. (1982), Random-effects models for longitudinal data, Biometrics, 38(4), 963-974. https://doi.org/10.2307/2529876
  49. [49]  Laird, N.M. and Ware, J.H. (1982), Random-effects models for longitudinal data, Biometrics, 38(4), 963-974. https://doi.org/10.2307/2529876
  50. [50]  Breusch, T.S. and Pagan, A.R. (1980), The Lagrange multiplier test and its applications to model specification in econometrics, Review of Economic Studies, 47(1), 239-253. https://doi.org/10.2307/2297111
  51. [51]  Bloomberg (2020), Environmental and social scores methodology and field information, Bloomberg ESG Terminal Report.
  52. [52]  Henderson, D. (1997), The case against ``corporate social responsibility'', Policy and Politics, 17(2), 28-32.
  53. [53]  Sánchez-Marín, G., Lucas-Pérez, M.E., Baixauli-Soler, S., Main, B.G.M., and Mínguez-Vera, A. (2022), Excess executive compensation and corporate governance in the United Kingdom and Spain: A comparative analysis, Managerial and Decision Economics, 43(7), 2817-2837. https://doi.org/10.1002/mde.3564
  54. [54]  Hussain, N., Rigoni, U., and Cavezzali, E. (2018), Does it pay to be sustainable? Looking inside the black box of the relationship between sustainability performance and financial performance, Corporate Social Responsibility and Environmental Management, 25(6). https://doi.org/10.1002/csr.1631

Copyright © 2011-2026 L & H Scientific Publishing. All rights reserved. Wildcard SSL Certificates