The ESG score impact on Financial Performance and Capital Structure of the Firm

Abstract

This research paper delves into the examination of the influence that environmental, social, and governance (ESG) scores of companies have on their financial performance and capital structure. With the increasing worldwide focus on adhering to environmental regulations, sustainable finance has emerged as a crucial area of contemporary economic studies. Therefore, this study aims to explore the relationship between a company's ESG score and its financial performance and capital structure. To achieve this objective, a quantitative methodology is employed, utilizing a dataset encompassing 807 private and public firms across diverse industries in four Scandinavian countries (Denmark, Sweden, Finland, and Norway) as well as Germany. The findings of this research paper will contribute to the understanding of the impact of ESG scores on companies' financial performance and capital structure, providing insights for investors, policymakers, and stakeholders interested in sustainable finance and responsible investment practices.