Effect of Environmental Social and Governance (ESG) Performance on Profitability of Non-Financial Firms: Empirical Insights from the UK

Znar Nahro Ahmed; Hawkar Anwer Hamad; Khowanas Saeed Qader

doi:10.25212/lfu.qzj.9.2.43

Authors

Znar Nahro Ahmed Department of Accounting and Finance, College of Administration and Economics Lebanese French University, Kurdistan Region, Iraq
Hawkar Anwer Hamad Department of Accounting and Finance, College of Administration and Economics Lebanese French University, Kurdistan Region, Iraq
Khowanas Saeed Qader Department of Accounting and Finance, College of Administration and Economics Lebanese French University, Kurdistan Region, Iraq

DOI:

https://doi.org/10.25212/lfu.qzj.9.2.43

Keywords:

Governance, Environment, ESG, Social, and Profitability

Abstract

This research seeks to analyze the Effect of ESG Performance on Profitability of Non-Financial Firms: Empirical Insights from the UK, Index during the period from 2012 to 2021. This research constitutes a confirmatory study employing a quantitative methodology. The study draws upon secondary data sourced from the Refinitiv website, encompassing a comprehensive sample of 215 companies that were active and registered during the analyzed timeframe. The focus was on non-financial enterprises, ensuring complete data coverage of relevant variables. To analyze the relationships, a panel data regression approach was adopted, employing the GMM model as the chosen estimation technique. In our analysis, ESG combined score (ESG_CS) emerged as a positive driver of profitability (ROA), while Social (SOC) and Environmental (ENV) factors exhibited negative influences. Governance (GOV) had an insignificant relationship with ROA, aligning with stakeholder theory. In the case of Return on Equity ('ROE'), our findings revealed that environmental and social factors (ENV and SOC) exerted detrimental effects. This succinct summary highlights the complex dynamics shaping financial performance in our analysis.

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