Analyzing The Impact of ESG Factors on Financial Performance: A Study of Indian Corporations

Abstract

The paper empirically explores the influence of Environmental, Social in addition to Governance (ESG) parameters on the financial performance of Indian corporations, with specific reference to its effects on vital financial metrics like Return on Assets (ROA) and Return on Equity (ROE). The research examines the period from fiscal year 2019 to 2024. It was carried out for a sample size of 100 publicly listed companies from New Delhi Stock Exchange (NSE) using statistical techniques such as Chi-Square, Correlation and Regression Analysis demonstrating the association between ESG scores with financial outcomes. This shows that with more comprehensive ESG disclosure processes in place, the greater the likelihood of financial performance being positively influenced. The most powerful dimension is governance awareness, based on the combined social factor dimensions and the environmental measures, because ethical management and sustainability practices are effective only when they lead to better financial performance. Furthermore, the research emphasizes the effect of ESG on investor trust and risk mitigation as well as long-term capital, concluding that those who provide transparent ESG information are better placed to access sustainable financial growth. Drawing from these results, the paper offers strategic insights for Indian firms to mainstream ESG processes which highlight that transparency and governance improvements would be a primary determinant of reorientation of strategies with greater engagement with stakeholders. This study extends our existing knowledge about the relationship between ESG and CF by focusing on an emerging market like India, where sustainability is fast becoming a key focus of corporate governance.