Revisiting the impact of ESG on financial performance of FTSE350 UK firms: Static and dynamic panel data analysis

Ahmad, Nisar; Mobarek, Asma; Roni, Naheed Nawazesh

doi:10.1080/23311975.2021.1900500

Cited by 117 publications

(100 citation statements)

References 45 publications

(49 reference statements)

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“…However, this negative relationship between ESG scores and average returns seems to be more consistent for Europe than for the US. These findings are in line with Ahmad et al [54], who studied the relationship between ESG and financial performance of the FTSE350 for the time period between 2002 and 2018 and found that "firm size moderates the relationship between ESG performance and financial performance". We also conduct this investigation using Thomson Reuters Refinitiv ESG Scores and find similar results for the positive relationship between ESG and market capitalization.…”

Section: Datasupporting

confidence: 90%

Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors

2021

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In this article, we investigate the notion of doing well while doing good from the perspective of passive portfolio strategies. We analyze a number of asset allocation strategies based on ESG-weighting and compare their financial and ESG performance for the US and Europe. We find no significant difference in the financial performance but superior ESG performance of ESG-based strategies. It can be concluded that, compared to a naive strategy, socially responsible investors are willing to pay a small premium for the impact of the portfolio via transaction costs when rebalancing the portfolio according to their preferences for social responsibility. In addition, when comparing the ESG-based strategies to a value-weighted strategy, we observe no significant difference in ESG performance but a high degree of significance in the superior financial performance of the ESG-based strategy. We also analyze the strategies with regards to the factor loadings given by the Fama–French five-factor model and a sixth factor denoted GMB (Good minus Bad) and find significant differences across the regions and strategies. Overall, the results show strong support of ESG-based strategies being preferred by socially responsible investors but also suggest that such strategies might be preferred by conventional investors looking for a passively managed alternative compared to a value-weighted index. Furthermore, it seems that such a strategy might be a more adequate benchmark for active SRI funds.

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Section: Datasupporting

confidence: 90%

Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors

2021

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“…Ahmad et al (2021), this paper explores the impact of threedimensions of ESG, namely, OESG, IESG, and SIESG as the independent variables on energy-adjusted firm efficiency, as the existing literature rarely comprehensively discusses the impact of the three pillars of ESG in the same sample. In addition, the literature scarcely delves into what fuels the ESG pillars behind the presentation of established impacts.…”

mentioning

confidence: 99%

Nonlinear effects of ESG on energy‐adjusted firm efficiency: Evidence from the stakeholder engagement of apple incorporated

Ren

Ting

et al. 2022

Corp Soc Responsibility Env

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This study examines how the (i) overall environmental, social, and governance (OESG) performance; (ii) three individual E, S, and G (IESG) performance; and(iii) subcomponents of the three individual E, S, and G (SIESG) performance affect 29 Apple Incorporation partners' energy-adjusted firm efficiency from a nonlinear perspective. Our truncated regression findings from 145 firm-year observations for the period of 2016-2020 indicate that the association between OESG performance and energy-adjusted firm efficiency is U-shaped. However, this nonlinear U-shape exists in the individual S and G but not E of the IESG performance. Moreover, only certain subcomponents of the SIESG performance are nonlinearly related to energyadjusted firm efficiency. Overall, we highlight both the costs and benefits of the ESG performance for maintaining sustainable development and stakeholder engagement.The energy-adjusted firm efficiency estimated through the multidimensional data envelopment analysis approach is also noteworthy for policy and decision-making purposes.

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“…In addition, we base our analyses on U.S. data due to the availability of reliable data for a long interval, which is critical to our methodology. However, Ahmad et al ( 2021 ), Duque-Grisales and Aguilera-Caracuel ( 2019 ), and Johnson et al ( 2019 ) showed that the relationship between financial performance and ESG performance differs across countries. Therefore, future research is needed to determine how these relationships vary across countries.…”

Section: Discussionmentioning

confidence: 99%

“…Several meta-analyses (e.g., Busch & Friede, 2018 ) concluded that social and environmental responsiveness positively affects financial performance. Other studies find differences in the role of ESG in explaining corporate financial performance; namely, social responsibility is a driver of financial performance whereas environmental and governance performance do not affect financial performance (Ahmad et al, 2021 ; Tanin et al, 2019 ).…”

Section: Corporate Sustainable Development Indicators: Hypothesesmentioning

confidence: 99%

Disentangling the Bidirectional Relationships Across the Corporate Sustainable Development Indicators

2022

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This study disentangles the relationships that exist between the four indicators of corporate sustainable development: economic, environmental, social, and governance. We account for the potential bidirectionality of the relationships, control for the dynamic nature of the sustainability process, and address the endogeneity problem to appropriately analyze the sustainability process. We estimated a panel data from 734 U.S. companies from 2004 through 2016 by using the system generalized method of moments and find evidence of a clear dynamic nature of the businesses’ sustainability process. The results show that the current levels of the four sustainable development indicators are strongly determined by the levels of these indicators in the two previous years. Our results also show that corporate sustainable development follows a virtuous circle. The relationships across the economic, environmental, and social indicators are bidirectional and positive. Hence, these three sustainability indicators do not compete for available resources. On the contrary, they are tightly interconnected in a firm’s sustainable development processes. Therefore, practitioners and regulators should consider these indicators simultaneously to promote sustainability in businesses and apply long-term sustainability policies. Altogether, our evidence supports the idea that firms can do good by doing well, and they do well by doing good.

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Revisiting the impact of ESG on financial performance of FTSE350 UK firms: Static and dynamic panel data analysis

Cited by 117 publications

References 45 publications

Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors

Passive ESG Portfolio Management—The Benchmark Strategy for Socially Responsible Investors

Nonlinear effects of ESG on energy‐adjusted firm efficiency: Evidence from the stakeholder engagement of apple incorporated

Disentangling the Bidirectional Relationships Across the Corporate Sustainable Development Indicators

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