Impact of ESG Ratings on Corporate Financial Performance: A Panel Study of Indian Listed Enterprises

DOI: https://doie.org/10.10399/APER.2025565801

Authors:

Dr. Anuj Aggarwal, Ms. Ishu Aggarwal, Anadya Gupta

Keywords:

ESG, Corporate sustainability, Sustainability performance, Firm performance, Panel data regression.

Abstract:

The significance of sustainable and responsible investment strategies has steadily risen due to the increased cognizance of environmental, social & governance (ESG) aspects in the emerging economies like India. Hence, by taking ESG into investment consideration, the study has made a sincere attempt to empirically investigate the impact of ESG rating on the profitability and value of Indian publicly listed entities, which can be measured by various indicators such as return on assets (ROA), Tobin’s Q ratio etc. The study has used annual ESG ratings published by CRISIL, pertaining to 54 Indian companies listed on BSE 100 ESG Index, covering the period from year 2022 to 2024. The random effects panel data regression analysis has been employed to test the significance of ESG factors on the firm performance. The findings of the study indicate that higher ESG rating enhances the financial performance of the firm, as evaluated by both accounting and market related measures. The findings have practical implications on corporations, investors, policy-makers as well as regulatory bodies. Further, the study highlights the need for robust sustainability reporting among Indian listed enterprises.   

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