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Evaluation of strategic and financial variables of corporate sustainability and ESG policies on corporate finance performance

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  • Piers Weston
  • Matthias Nnadi

Abstract

Over the past few decades, there has been a sharp increase in interest by investment professionals to become more socially responsible with regards to their decision making relating to their choice of investments and overall make-up of their portfolios. This paper conducts various tests to establish a link between Corporate Social Responsibility (CSR) and Corporate Financial Performance (CFP). This paper adds a strategic management element by establishing various frameworks that corporations can include in the decision-making process and includes CSR and Environmental, Social and Governance (ESG) principles when making investment decisions. The sample chosen for this paper includes the iShares MSCI KLD 400 Social exchange traded fund (ETF), iShares Core S&P 500 ETF as well as firms that follow the Principles for Responsible Investing (PRI). Overall, there is no evidence to suggest that ethical ETFs outperform conventional ETF's however PRI following firms outperform those who do not follow the guidelines.

Suggested Citation

  • Piers Weston & Matthias Nnadi, 2023. "Evaluation of strategic and financial variables of corporate sustainability and ESG policies on corporate finance performance," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 13(2), pages 1058-1074, April.
    • Handle: RePEc:taf:jsustf:v:13:y:2023:i:2:p:1058-1074
    DOI: 10.1080/20430795.2021.1883984
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    Cited by:

    1. Wu, Zihao & Lin, Siliang & Chen, Tianhao & Luo, Chunyang & Xu, Hui, 2023. "Does effective corporate governance mitigate the negative effect of ESG controversies on firm value?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1772-1793.
    2. Esparcia, Carlos & Diaz, Antonio & Alonso, Daniel, 2023. "How important is green awareness in energy investment decisions? An environmentally-based rebalancing portfolio study," Energy Economics, Elsevier, vol. 128(C).
    3. Hasan F. Baklaci & William I-Wei Cheng & Jianing Zhang, 2024. "Performance Attributes of Environmental, Social, and Governance Exchange-Traded Funds," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(2), pages 307-334, June.
    4. Syed Shoaib Nazir & Taimur Ashiq & Mazhar Farid Chishti & Riffat Ullah & Athar Marwat, 2024. "Assessing Financial Stability through ESG: The Impact of Sustainable Finance on Commercial Banks listed in Pakistan Stock Exchange (PSX)," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(3), pages 120-129.

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