Sustainable Finance and ESG: The Impact of Environmental, Social, and Governance Principles Implementation on Corporate Financial Performance and Firm Value
Jul 2026· International Journal of Economics, Commerce and Management· Vol 3, pp. 13-21· 0 citations· 25 references
Abstract
This study examines whether environmental, social, and governance (ESG) practices enhance corporate profitability and firm value by reviewing empirical evidence from previous studies. Using a systematic literature review guided by a PRISMA approach, peer-reviewed articles published between 2010 and 2025 and indexed in Scopus and Web of Science were analyzed. The findings indicate that firms adopting ESG practices generally achieve stronger financial performance and higher market valuation, although the strength and direction of the relationship vary across contexts. Five key factors influence these outcomes: the credibility of ESG disclosure, the financial materiality of ESG issues within the industry, governance quality, environmental exposure, and the institutional maturity of the market. The review also highlights that inconsistencies among ESG rating agencies contribute to measurement differences, leading to mixed empirical findings. Drawing on stakeholder and legitimacy theories, the study suggests that effective ESG implementation reduces information asymmetry, lowers financing costs, strengthens corporate reputation, and increases investor confidence. An integrative framework is proposed to explain the relationship between ESG implementation and firm value while identifying future research opportunities, particularly in emerging economies such as Indonesia, where sustainable finance regulations continue to develop.
Over the past few years, the need for disclosing non-financial information has increased significantly, particularly regarding Environmental, Social, and Governance (ESG) aspects, as investors increasingly seek transparency in corporate practices beyond conventional financial reporting. This study aimed to analyze the relationship between ESG principles and corporate value, with an emphasis on how effective ESG implementation can enhance long-term value creation and sustainability. The research employed a Systematic Literature Review (SLR) approach, which involved identifying, evaluating, and synthesizing relevant evidence related to the research topic. A total of 30 selected articles were synthesized from an initial screening of 92 eligible articles based on predefined inclusion criteria. The findings, presented through a classification matrix, revealed that the impact of ESG disclosure on corporate value remained inconsistent across studies. These variations were influenced by regional contexts—for example, positive governance effects were more evident in Indonesia, varied across studies in Thailand, and remained significant in China even after the COVID-19 pandemic—as well as industry characteristics and external economic conditions, such as financial crises and macroeconomic uncertainty. Although the findings differed, the impact of ESG disclosure that was weak or insignificant in isolation was often strengthened when moderated by factors such as competitive advantage, governance mechanisms, and financing constraints. This study concluded that ESG disclosure alone was not sufficient to drive corporate value; instead, companies needed to integrate ESG practices with strategic advantages to achieve optimal outcomes. Future research is recommended to expand regional coverage and include broader industry sectors to generate more generalizable and comparable findings across different markets.Over the past few years, the need for disclosing non-financial information has increased significantly, particularly regarding Environmental, Social, and Governance (ESG) aspects, as investors increasingly seek transparency in corporate practices beyond conventional financial reporting. This study aimed to analyze the relationship between ESG principles and corporate value, with an emphasis on how effective ESG implementation can enhance long-term value creation and sustainability. The research employed a Systematic Literature Review (SLR) approach, which involved identifying, evaluating, and synthesizing relevant evidence related to the research topic. A total of 30 selected articles were synthesized from an initial screening of 92 eligible articles based on predefined inclusion criteria. The findings, presented through a classification matrix, revealed that the impact of ESG disclosure on corporate value remained inconsistent across studies. These variations were influenced by regional contexts—for example, positive governance effects were more evident in Indonesia, varied across studies in Thailand, and remained significant in China even after the COVID-19 pandemic—as well as industry characteristics and external economic conditions, such as financial crises and macroeconomic uncertainty. Although the findings differed, the impact of ESG disclosure that was weak or insignificant in isolation was often strengthened when moderated by factors such as competitive advantage, governance mechanisms, and financing constraints. This study concluded that ESG disclosure alone was not sufficient to drive corporate value; instead, companies needed to integrate ESG practices with strategic advantages to achieve optimal outcomes. Future research is recommended to expand regional coverage and include broader industry sectors to generate more generalizable and comparable findings across different markets.
Kevindra Adityananda Galih Prakasa, S. Hadi, Andik Wijayanto· Journal of social research· 0 citations
The growing integration of Environmental, Social, and Governance (ESG) considerations into corporate strategy has made sustainable finance a prominent research topic, yet its relationship with corporate financial performance remains inconclusive across industries and countries. This study aims to systematically review existing empirical evidence on the implementation of sustainable finance and its effects on corporate financial performance. A systematic literature review method was employed, following the Preferred Reporting Items for Systematic Reviews and Meta-Analyses framework. A total of 34 peer-reviewed articles published between 2015 and 2026 were selected from multiple academic databases through a structured screening process. The findings reveal that sustainable finance practices, including environmental, social, and governance integration, sustainability reporting, green financing, and climate-risk management, are generally associated with improved profitability, stronger market valuation, and better access to capital. However, mixed and negative outcomes were also identified, particularly in contexts where sustainability risks are poorly managed or where regulatory environments are underdeveloped. The review further highlights emerging research trends, including the growing role of mediation and moderation mechanisms in explaining the sustainable finance–performance relationship. These findings carry practical implications for managers, policymakers, and future researchers in the field of sustainable corporate finance.
Pra Gemini, Hasliah Hasliah, Fausiah Fausiah et al.· Jurnal Ilmiah Manajemen Kesa...· 0 citations
This article examines how Enterprise Risk Management (ERM), Good Corporate Governance (GCG), and Environmental, Social, and Governance (ESG) disclosure shape corporate financial performance an increasingly pressing concern given growing demands for transparency, governance quality, and sustainability in today's business environment. The study seeks to understand how the joint application of these three governance mechanisms affects firm financial outcomes, particularly across emerging economies. To this end, a literature review was conducted on nine peer-reviewed articles published between 2018 and 2026, drawn from a diverse range of contexts including Indonesia, Malaysia, Vietnam, the ASEAN-5 region, Iran, Ghana, the United Kingdom, and the Nordic countries. The synthesis of these sources suggests that ERM consistently has a positive and significant effect on financial performance and firm value. GCG mechanisms, especially audit committee expertise, board size, and foreign ownership also contribute meaningfully to financial performance, although their effectiveness varies across institutional settings. ESG disclosure emerges as more than a direct determinant of firm value; it also serves as a moderator that strengthens the positive influence of ERM on corporate outcomes. Based on these findings, this study recommends that companies integrate ERM, GCG, and ESG simultaneously to enhance both financial performance and long-term organizational resilience.
Baskara Adi Prasatya, Rio Dhani Laksana· The International Conference...· 0 citations
Environmental, Social, and Governance (ESG) disclosure has become increasingly important for
enhancing corporate transparency and sustainable value creation. However, empirical evidence
on its effect on financial performance remains inconclusive, particularly in Nigeria, where
previous studies have largely relied on aggregate ESG measures and provided limited evidence
for the consumer goods sector. This study examined the effect of environmental, social, and
governance disclosures on the Return on Equity (ROE) of selected listed consumer goods firms in
Nigeria. An ex post facto research design was adopted using secondary data from the annual
reports of five purposively selected firms covering 2015–2025. ESG disclosure indices were
developed using the Global Reporting Initiative framework, and panel regression techniques were
employed for analysis. The findings revealed that environmental, social, and governance
disclosures each had a positive and statistically significant effect on ROE, with governance
disclosure exerting the strongest influence. Firm size positively affected financial performance,
while leverage had a significant negative effect. The study contributes by providing disaggregated,
sector-specific evidence on the ESG–financial performance nexus in Nigeria. The findings suggest
that firms should strengthen ESG reporting, while regulators should enhance ESG disclosure
standards to improve corporate transparency, investor confidence, and sustainable financial
performance.
E. A. Ukpe· INTERNATIONAL JOURNAL OF SOC...· 0 citations
Sustainable development is increasingly reshaping corporate strategies, particularly in emerging markets such as India, where environmental, social, and governance (ESG) integration has become pivotal for long‐term value creation. This study examines the impact of ESG performance on firm outcomes for Nifty 500 firms over 2014–2024, considering both aggregated and disaggregated ESG dimensions, while assessing the influence of country‐level governance mechanisms. Using panel regression analysis, the findings reveal that robust ESG practices significantly enhance financial, operational, and market performance, underscoring their strategic relevance. At the disaggregated level, social (SOC) and governance (GOV) performance consistently improve profitability, efficiency, and market valuation, whereas environmental (ENV) initiatives exhibit short‐term negative effects, likely due to compliance and investment costs. Further, country governance indicators, including voice and accountability (VAA), political stability and absence of violence (PSV), government effectiveness (GVE), regulatory quality (REQ), rule of law (ROL), and control of corruption (COC), differentially shape the ESG–performance link. While VAA, PSV, REQ, and GVE enhance ESG's impact, ROL and COC constrain immediate gains, highlighting the role of governance quality in aligning ESG initiatives with firm‐level outcomes. The study provides critical insights for regulators, policymakers, investors, and corporate managers, emphasizing governance as a key enabler of sustainable growth in an emerging market.
Rizwana Khurshid, A. Islam· Business Strategy & Deve...· 0 citations
The incorporation of Environmental, Social, and Governance (ESG) measures into business decision-making has received a lot of attention because of the potential influence on financial performance. This study examines the link between ESG elements and company financial performance, using Unilever as a case study. This study looks at how sustainability activities help to risk reduction, operational efficiency, and long-term value development by analysing ESG reporting in depth. The report emphasises the importance of ESG openness in boosting investor trust, developing brand reputation, and achieving financial success. This study presents a complete framework for understanding the strategic value of ESG in corporate finance by combining stakeholder theory, a resource-based perspective, and signalling theory. The findings show that organisations that effectively implement ESG principles likely to have increased financial stability. The findings are useful for firms, investors, and governments, highlighting the importance of standardised ESG disclosures and sustainable corporate policies.
Devanshi Saini, Namita Sahay· International Journal of Cre...· 0 citations
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