The Relationship Between ESG Ratings and Financial Performance of Coal Firms — the Case of China Shenhua and China Coal Energy

Since the concept of ESG was explicitly introduced, Chinese coal companies have paid more attention to the three aspects of environmental, social and corporate governance (ESG). This paper mainly adopts a case study approach to elaborate on the three aspects of ESG performance of China Shenhua and China Coal Energy respectively. The ESG rating scores of the two companies are compared and analysed through the WindESG rating system, and the three types of financial performance of the two companies, namely return on assets, net sales margin and asset turnover ratio, are compared and analysed using the DuPont analysis respectively. Two conclusions were drawn from the study: firstly, the analysis of the financial performance of the companies showed that the return on assets was mainly influenced by the net sales margin of the companies; secondly, from a short-term perspective, the financial performance of the companies was positively correlated with the ESG ratings.