Good for the planet, good for the wallet: The ESG impact on financial performance in India

Abstract

We examine the impact of environmental, social, and governance (ESG) practices on financial performance among Nifty 50 companies in India from 2015 to 2022. Using fixed-effects panel quantile regression, we observe that the relationship between ESG practices and financial profitability varies across the return on equity (ROE) distribution. While the environmental pillar score and the governance pillar score consistently negatively impact ROE across almost all quantiles with high statistical significance, the social pillar score exhibits mostly an insignificant relationship. Its impact is negative but only mildly statistically significant in the lower end of the ROE distribution. The findings and their implications are important to investors, corporate executives, and policymakers.