The Impact of ESG Performance on the Valuation of Publically Listed Companies in emerging markets

Abstract

Purpose of the Study: The purpose of this study is to examine the relationship between Environmental, Social, and Governance (ESG) performance and corporate valuation in the Indian context. It aims to understand whether ESG factors significantly influence investor perception and the long-term financial performance of companies.

Objectives of the Study: The objectives are to evaluate ESG scores of 100 Indian companies, classify them into low, medium, and high categories, and compare their valuation metrics. The study seeks to identify whether ESG performance creates measurable differences in valuation and to provide insights for both policymakers and investors.

Methodology: The research is based on secondary data collected from 100 listed Indian companies. ESG scores were categorized into three groups and valuation measured through price-to-earnings ratios. One-way ANOVA was applied to test differences across groups, supported by additional reliability and validity tests for robust analysis.

Findings: The analysis reveals significant differences in company valuations across ESG categories, with high ESG performers generally showing stronger valuation outcomes. This indicates that sustainable and responsible business practices positively influence investor confidence. The study suggests ESG integration is not just ethical but also financially beneficial for firms in emerging markets.