Effect of ESG Factors on the Financial Performance of Philippine Firms

Abstract

This paper addresses how environmental, social, and corporate governance (ESG) factors can contribute to the market performance of companies listed in developing countries. In this case study, the impact of ESG screens on the financial performance of companies in the Philippine Stock Exchange from 2010-2018 was estimated using quarterly-reported panel financial and ESG data for 26 firms spanning eight years. Using a range of several financial ratios as regress and to capture the relationship between profitability or equity valuation and ESG while controlling for size and leverage as added regressors in six empirical experiments, only one showed a non-negative correlation, three were insignificant, and the last two showed significant negative correlations between ESG screens and financial performance.