How Financial Indicators Shape ESG Performance? A Panel Data Analysis of India's NSE-Listed Firms

Abstract

This study examines the interaction between financial performance and Environmental, Social, and Governance (ESG) outcomes of Indian companies listed on the NSE for the 2015–2022 period, covering both pre-COVID (2015–2019) and post-COVID (2020–2022) periods. The research employs panel data of 27 companies that continuously remained in the NSE 500 index for which ESG information was available during the study period, as calculated by Bloomberg based on disclosures under the Business Responsibility and Sustainability Reporting (BRSR) framework. The study takes into account the impact of financial indicators such as Tobin's Q, ROA, ROE, stock price, and financial leverage on overall and field-based ESG performance and the way the COVID-19 pandemic reshaped business sustainability agendas.

The results also indicate that Tobin's Q consistently supports ESG enhancements, specifically in environmental and governance dimensions, suggesting that more valuable companies are more responsive to stakeholder demands for sustainability. In contrast, profitability metrics like ROE and ROA indicate trade-offs, where returns focus is usually concurrent with declining social or governance scores. The stock price displayed weak yet consistent negative correspondence to ESG performance, where short-run market pressure collides with long-run sustainability goals. The study underscored the call to align money-making and ESG promise as needing strategic coherence and policy interventions to nurture resilient and responsible development under varied economic climates.