A Comparative Analysis of Financial Performance in Companies with Robust ESG Practices Versus Traditional Firms: A case of an emerging Asian Economy

Abstract

The main focus of this study is to analyze the role ESG (Environmental, Social and Governance) factors in the financial performance of companies that are incorporating these factors versus the companies that are not. Financial metrics that are used for the matter are ROA, ROE, net profit margins and stock performance, which will help to compare the impact of ESG factors on the financial performance of both group of companies. The results of this study indicates that indeed incorporation of ESG factors will positively impact the financial performance of companies. Moreover, adoption of ESG is also tied with positive public image, investor confidence and reduced regulatory risk. Firms adhering to ESG practices are able to adapt to economic decline and also attract investors that prefer ethical investments. This study focuses to highlight the importance ESG factors and encourage firms to adapt ESG practices which will have a positive impact in their financial condition, moreover, these practices will also reflect in positive recognition of their brand name as there is an evident rise population preferring companies and products that are playing their role in order to better off the environment.