The Impact of ESG Performance on Financial Performance : Evidence from NASDAQ Stockholm

Sammanfattning: This thesis investigates whether environmental, social, and governance (ESG) performance impacts financial performance in the Swedish market. ESG performance is measured using the overall ESG score and the three individual pillar scores (environment, social, and governance). Financial performance is assessed using a market-based financial measure(Tobin's Q) and an accounting-based financial measure (Return on Assets, ROA). Further, we introduce a one-year lag between ESG performance and financial performance. We analyze a total of 858 firm-year observations from 266 firms listed on the NASDAQ Stockholm stock exchange over the five-year period from 2018 to 2022, with controls for firm size and leverage. Our findings reveal that none of the ESG performance measures have an impact on the financial performance measures (ROA or Tobin’s Q). This indicates a need for further research into the complexities of the ESG impact on firm financial performance within the Swedish context.