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Cited by 40Corporate Social Responsibility ReportingSustainable Finance and Green BondsCorporate Governance and Financial Management

The DOI matches its Crossref record; 89 of the 91 references it cites were found in a registry or an index, and 2 are not checked yet.

Integrating Environmental, Social, and Governance (ESG) Factors into the Investment Returns of American Companies

Open access
Lunawat, Rachana Manoj, Elmarzouky, Mahmoud, Shohaieb, Doaa·2025·Sustainability
DOI 10.3390/su17198522
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Abstract

This study investigates the influence of Environmental, Social, and Governance (ESG) factors on the financial performance of publicly traded U.S. companies between 2013 and 2023. Using a balanced panel dataset of 386 S&P 500 firms and 4246 firm-year observations, the analysis applies panel data regression models with fixed effects to evaluate the association between ESG scores and two financial indicators: Return on Assets (ROA) and Tobin’s Q. The results reveal a modest association with ROA, but a significantly stronger link with Tobin’s Q, suggesting that while ESG practices may not substantially boost short-term profitability, they are positively perceived by investors and contribute to long-term market value. These findings are consistent with stakeholder and signalling theories, indicating that strong ESG performance reflects effective management and lower investment risk. The limited impact on ROA may stem from the initial costs of implementing ESG initiatives. This study highlights practical implications for corporate leaders and policy-makers, advocating for ESG integration as a long-term value driver. Future research should explore alternative ESG rating systems and consider sectoral dynamics and broader market influences.

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Cites

Research works printed but not linked: 9

  1. Yen, A.C. (2004). Effects of Investor Judgments from Expanded Disclosures of Non-Financial Intangibles Information. [Ph.D. Dissertation, The University of Texas at Austin].
  2. Eccles, 2018, Why companies should report financial risks from climate change, MIT Sloan Manag. Rev., 59, 1
  3. Pamfilie, R., Dinu, V., Vasiliu, C., Pleșea, D., and Tăchiciu, L. (2022, January 25–27). ESG–A New Global Trend. Examples for Austria, Poland, and Romania. Proceedings of the 8th BASIQ International Conference on New Trends in Sustainable Business and Consumption, Graz, Austria.
  4. Spence, M. (1978). Job Market Signaling. Uncertainty in Economics, Elsevier.
  5. Wooldridge, J.M. (2010). Econometric Analysis of Cross Section and Panel Data, MIT Press.
  6. Baum, C.F. (2009). An Introduction to Stata Programming, Stata Press.
  7. Cameron, A.C., and Trivedi, P.K. (2010). Microeconometrics Using Stata, Stata Press.
  8. Long, J.S., and Freese, J. (2006). Regression Models for Categorical Dependent Variables Using Stata, Stata press.
  9. Mitchell, M.N. (2010). Data Management Using Stata: A Practical Handbook, Stata Press.

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Metadata

Authors
Lunawat, R. M., Elmarzouky, M., & Shohaieb, D.
Affiliations
  • Kingston University London (GB)
  • University of St Andrews (GB)
  • Aston University (GB)
Corresponding author
Shohaieb, Doaa
ORCID
Venue
Sustainability
Publisher
MDPI AG
Published
2025-09-23
Volume
17
Issue
19
Pages
8522
ISSN
2071-1050 (ISSN-L)
DOI
10.3390/su17198522
OpenAlex
W4414438669
Cited by
23
References
89
Citations by year
2026: 20 · 2025: 3
FWCI
19.66
Type
journal article
Language
en
Open access
Licence
Locations
  • Sustainability (publishedVersion, cc-by)
  • Aston Publications Explorer (Aston University) (acceptedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
  • Social Sciences › Economics, Econometrics and Finance › Finance › Sustainable Finance and Green Bonds
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Governance and Financial Management
Keywords
ESG factors, ESG ratings, corporate financial performance, return on assets, Tobin's Q, market value, stakeholder theory, signaling theory, ESG investing, S&P 500 firms

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