Abstract

In the era of global climate change and social inequalities, sustainability has become an indispensable part of corporate strategy and financial decision-making. The central question of this research is how and to what extent corporate sustainability efforts and their non-financial results correlate with traditional financial performance indicators. The scholarly discourse in this field is divided: while the neoclassical school and Friedman’s thesis suggest that a company's primary responsibility is profit maximization, ecological economics and stakeholder theory see long-term survival in the integration of environmental and social responsibility. The European Union has taken a pioneering role in this area with the introduction of the Sustainable Finance Action Plan and the Corporate Sustainability Reporting Directive (CSRD). The latter, based on the principle of double materiality, mandates companies to report on their impact on the environment as well as the financial risks of sustainability factors for the company.

The objective of this empirical research is to examine, within this theoretical and regulatory framework, whether a detectable trend exists between companies' ESG (Environmental, Social, Governance) scores and their profitability, liquidity, and solvency indicators. The methodological basis of the study is panel regression analysis, which is suitable for the joint analysis of cross-sectional and time-series data, effectively handling individual corporate characteristics. The research sample focuses on large companies in the European Union that have consistently held ESG ratings over the past five years, representing approximately 900 companies. To ensure a robust analysis, the study covers a 20-year period, with data provided by the LSEG (formerly Refinitiv) database.

In the statistical model, the dependent variable is the ESG score, while the explanatory variables include classic financial indicators such as Return on Assets (ROA), Return on Equity (ROE), Earnings Per Share (EPS), as well as liquidity ratios and leverage indicators. During the panel regression, fixed effects or random effects models are applied, with the most statistically appropriate specification selected using the Hausman test. The research also considers the aspects of signaling theory, according to which well-performing companies attempt to reduce information asymmetry and increase investor confidence through transparent reporting.

The expected results of the study will shed light on which financial profiles are most associated with intensive improvements in sustainability performance and how tightening EU regulations have reshaped capital allocation processes. The scientific contribution of the research lies in testing the synergies between sustainability and financial success using long-term panel data, providing a critical analysis of the feasibility of "green growth". The findings provide relevant information not only for the scientific community but also for regulators and market participants regarding the impact of the sustainable economic transition on financial stability.