IMPACT OF ESG SCORES ON FINANCIAL PERFORMANCE IN INDIAN NSE (ESG) LISTED COMPANIES

Abstract

The modern global environment is characterized by problems such as the reduction of biological diversity, climate change, and social inequalities in income, which makes governments and organizations pay attention to the concept of sustainable development. This research investigates the ESG score's impact on companies' financial performance over a period of ten years between 2013 and 2023 which are the companies enlisted in ESG Index of the National Stock Exchange (NSE) India. Using data from LSEG for ESG scores and from PROWESS for financial data, this study applies quantitative techniques of analysis involving, ANOVA, post hoc tests, and panel data regression analysis to test this relationship. The research analysis shows huge disparities in ESG scores relative to the industry, where information technology industry had the highest score while the automobile industry had the lowest score. Regression analysis has suggested that ESG scores have insignificant effects on key accounting-based figures such as PAT, RONW, ROCE, and ROA but significantly affect TSR in a negative manner. The rise in social scores has a positive impact on the performance measures while the Environmental and Governance scores have a negative impact. Other factors namely age, leverage, and size of the company also act as important control variables. The research also suggests that understanding the role of ESG considerations is essential; however, they are not equal in terms of financial implications, which in turn emphasizes the significance of approaching the integration of sustainability into corporate management with caution.