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Environmental, social and governance (ESG) activity and firm performance: a review and consolidation

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  • Danny Z. X. Huang

Abstract

Interest in why firms conduct environmental, social and governance (ESG) activity is longstanding and increasing. Our understanding, however, remains fragmented with alternative accounts that seek to explain the relationship between ESG performance (ESGP) and corporate financial performance (CFP). This paper reviews alternative accounts for the relationship and finds that the weight of empirical evidence shows a positive, statistically significant but economically modest ESGP–CFP link, consistent with theoretical expectations. This economically modest relationship suggests ESG activity is unlikely to be primarily motivated by narrow measures of CFP. Further scholarship viewing ESG as part of overall firm activity would be constructive.

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  • Danny Z. X. Huang, 2021. "Environmental, social and governance (ESG) activity and firm performance: a review and consolidation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 335-360, March.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:1:p:335-360
    DOI: 10.1111/acfi.12569
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    Cited by:

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    2. Veda Fatmy & John Kihn & Jukka Sihvonen & Sami Vähämaa, 2022. "Does lesbian and gay friendliness pay off? A new look at LGBT policies and firm performance," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 213-242, March.
    3. Richard Walton, 2022. "What Do the Consequences of Environmental, Social and Governance Failures Tell Us about the Motivations for Corporate Social Responsibility?," IJFS, MDPI, vol. 10(1), pages 1-19, March.
    4. Petr Petera & Jaroslav Wagner & Renáta Pakšiová, 2021. "The Influence of Environmental Strategy, Environmental Reporting and Environmental Management Control System on Environmental and Economic Performance," Energies, MDPI, vol. 14(15), pages 1-20, July.
    5. Rendani Mavis Matakanye & Huibrecht Margaretha van der Poll & Binganidzo Muchara, 2021. "Do Companies in Different Industries Respond Differently to Stakeholders’ Pressures When Prioritising Environmental, Social and Governance Sustainability Performance?," Sustainability, MDPI, vol. 13(21), pages 1-22, October.
    6. Xin Xu & Yi Xie & Feng Xiong & Yan Li, 2022. "The Impact of COVID-19 on Investors’ Investment Intention of Sustainability-Related Investment: Evidence from China," Sustainability, MDPI, vol. 14(9), pages 1-37, April.
    7. Paola Brighi & Antonio Carlo Francesco Della Bina & Valeria Venturelli, 2022. "Do ESG Investments Mitigate ESG Controversies? Evidence From International Data," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0084, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".

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