Publication: Working Paper Series No. 152

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“Analysis of the Impact of ESG Performance on the Valuation and Profitability of Corporates in Comparison to Financial Institutions” by Edgar Löw (Frankfurt School of Finance and Management) and Juan Cordovez (Frankfurt School of Finance and Management) was published on 31 August 2023 in the EBI Working Paper Series No. 152.

Corporates and financial institutions are increasingly prioritizing and enhancing their focus on ESG factors, driven by the growing attention from shareholders, stakeholders, and regulators. After conducting an extensive analysis of the theoretical and empirical frameworks in this field, this paper evaluates the individual effects of ESG dimensions and sub-dimensions on the profitability and valuation of corporates and financial institutions. The paper’s results indicate a positive and statistically significant impact of ESG dimensions and sub-dimensions on the valuation of corporates, as evidenced by Tobin’s Q. However, the financial industry shows that only the Environment pillar exhibited statistical significance with minor influence. Similarly, no overall impact on both sectors’ profitability (ROE and ROA) is observed. Despite being statistically significant, the impact of three sub-dimensions on corporates’ ROA and the impact of the Environment pillar on financial institutions’ ROA is relatively small.

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