OIDA International Journal of Sustainable Development
Open-access peer-reviewed journal
https://doi.org/10.64211/oidaijsd190620
Evaluating the Role of ESG Scores in Shaping Financial Performance of Listed Companies in India
Jayashankar N 1,*, R. Shashidhar 2, P. Paramashivaiah 3, Valmiki Rama Krishna 4
1 Institute of Management Studies, Davangere University.
2 Institute of Management Studies, Davangere University.
3 Department of Studies and Research in Commerce, Tumkur University, India.
4 Department of Studies and Research in Political Science, Tumkur University, India.
*Corresponding authour: jayashankar0123@gmail.com
Volume 18, Issue 06, Pg. 259-268, 2026.
Abstract: This paper aims at determining whether the profit of a company in terms of the percentage of its returns on assets (ROA) is correlated with its performance on the environmental, social, and governance (ESG) rating. It also examines whether the association is good, bad or neutral. We have considered companies which are listed on the BSE 500 index. Their ESG ratings of 2021 were taken and the ones were compared against their ROA. The data came from CRISIL. It has a number of 34 companies in the year 2021.The regression analysis helped us to observe the dependence of ROA (the outcome) on ESG ratings (the predictor).We obtained a negative correlation between ESG scores and ROA with significance of 5%.One of the reasons might be that firms that pay attention to ESG invest more in organizational welfare and environmental regulations that may reduce the immediate profit. The second reason is because long-term investments related to ESG will not die off immediately, which will negatively impact the existing ROA. Tough ESG regulations can also drive away a number of investors or customers, whom will lower the income.Nevertheless, effective ESG practices can enhance their performance and reduce risk in the future through turning a business into a more resilient and sustainable company.
Keywords: ESG, PAT, Listed Companies, Sustainable Practice, Financial Performance.
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