Is ESG the Key to Stimulate Financial Performance? An Empirical Investigation

Environmental, Social, and Governance (ESG) principle is a critical framework for businesses and non-business entities. Recently, investors increasingly concentrate on the ethical impact of their investments in addition to financial rewards. The present study outlines links between a company’s ESG practices and its financial performance. By means of performance comparison between the Nifty 100 ESG and Nifty 100 Indices within the Indian context, it is suggested that investing in ESG-adopting companies can lead to better financial performance. The study uses statistical analysis to compare the performance of both indices between 2018 and 2022. The analysis includes financial ratios, such as P/E ratio, ROA, ROE, and ROCE. The findings reveal a relatively modest connection between ESG and P/E ratio. The stronger negative correlations between ESG and key financial metrics (ROA, ROE, and ROCE), signifies a more robust trade-off between ESG focus and financial performance.