Impact of Environmental, Social and Governance Factors on Financial Performance in Indian Firms

Abstract

A Master of Science in Finance (MSF) by Sreemol Susan Skaria entitled, “Impact of Environmental, Social and Governance Factors on Financial Performance in Indian Firms”, submitted in April 2025. Thesis advisor is Dr. Abdelaziz Chazi. Soft copy is available (Thesis, Approval Signatures, Completion Certificate, and AUS Archives Consent Form).Over the past decade, environmental, social, and governance principles have become central to corporate strategy amid the rising demand for transparency. In India, Environmental, Social, and Governance adoption is still emerging, and its financial implications remain underexplored. This study investigates how Environmental, Social, and Governance performance influences the financial outcomes of listed Indian listed firms and assesses its impact on shareholder value. Panel data from firms listed on the National Stock Exchange and Bombay Stock Exchange from 2019 to 2024 were analysed. Financial performance was measured using Return on Assets, Return on Equity and Tobin’s Q. Environmental, Social, and Governance scores and firm-level data were sourced from London Stock Exchange Group. This study uses panel regression models that account for differences between firms and sectors and includes past in dependent variables to deal with potential biases. The dynamic relationship was evaluated using the Generalized Method of Moments. The findings indicate that Environmental, Social, and Governance performance has no significant overall effect on Return on Assets, Return on Equity and Tobin’s Q, although sector-specific differences were observed. The result suggests that Return on Assets, Return on Equity investments may not yield short-term financial gains and may face delayed market recognition. The results support shareholder theory by indicating that Environmental, Social, and Governance initiatives offer only small short-term financial gains, while the effects in different sectors align with the stakeholder theory. This study emphasizes the need for further research on long-term Environmental, Social, and Governance outcomes and qualitative influences on corporate sustainability strategies.School of Business AdministrationDepartment of FinanceMaster of Science in Finance (MSF