The relationship between ESG performance and firm financial performance

This study investigates the effect of environmental, social, and governance (ESG) performance on financial performance among Malaysian firms. The analysis utilizes comprehensive financial and ESG performance data sourced from the Refinitiv Eikon database, covering a total of 40 firms with 200 firm-year observations spanning from 2019 to 2023. The results reveal a significant positive relationship between ESG performance and financial performance as measured by return on equity (ROE), while the relationship with return on assets (ROA) is not statistically significant. These findings contribute to the existing literature by providing fresh insights into the relationship between ESG performance and financial performance within the Malaysian context, highlighting the specific impact of ESG on equity returns while indicating that asset efficiency may not be immediately influenced by ESG initiatives.