Abstract

Today, business corporations across the globe are moving beyond the short-term myopic goal of profit maximization to long-term sustainability goals involving environmental, social and corporate governance goals. This is due to the growing realization that ESG factors constitute a significant source of risk for the business and can affect their financial returns. Academic research has shown that improved ESG performance has lowered risk and enhanced financial performance but results seemed to vary widely across countries. Regrettably, this subject remains largely un-researched in the context of emerging economies, including India. This paper attempts to fill this much needed gap in sustainability literature in one of the largest emerging market economies, India. It empirically examines the impact of environmental, social and corporate governance performance of companies on their financial performance, in India, using panel regression models. The findings of the study indicate that good corporate ESG performance enhances financial performance. The findings of this study have important implications for investors, corporate management as well as policymakers and regulators.