The Impact Of Environmental, Social And Governance Factors (Esg) On Firms’ Financial Performance: Evidence From Pakistan

Abstract

The aim of this research is to examine the impact of ESG (environmental, social, and governance factors) on the financial performance. In this study, the measurement of financial performance is undertaken by using accounting-based analysis including return on assets (ROA) and return on equity (ROE). The sample included 54 non-financial firms that are listed on the PSX and the data is collected from different sources including financial annual reports of the firms, World Bank and other sources for the period of 2010-2020. The estimation results following the Random Effects estimation methodology show that social factor, environmental factor and governance factor are having significant impact on ROA. Similarly, the estimation results show that social factor, environmental factor and governance factor were also having significant impact on ROE. The outcomes of the current study are also helpful to the management and policy makers. The study recommended that policy maker must manage their resources and invest in ESG activities for uplifting their financial performance in the long run.