ESG and Performance of European Listed Financial Companies: An Empirical Analysis

In recent years, the integration of Environmental, Social, and Governance (ESG) factors into corporate strategies has become crucial, particularly in the European financial sector. This study analyzes the impact of ESG practices on financial performance indicators, such as Return on Assets (ROA) and Tobin’s Q, using a sample of 192 European financial companies from 2017 to 2022. The results show that environmental scores have a significant positive effect on Tobin’s Q, indicating greater investor confidence, while the influence on ROA is not significant. In contrast, social and governance scores do not significantly affect either ROA or Tobin’s Q. This is likely due to the European financial sector’s stringent regulatory standards and mandatory compliance requirements, which minimize differences in these areas across firms. Additionally, high levels of financial leverage and larger company size are negatively associated with financial performance. This study contributes to understanding ESG dynamics in the financial sector, highlighting the role of environmental practices in creating market value and the need for regulations to prevent greenwashing.