Exploring the influence of ESG Factors on the financial performance of a european companyies – a comparison between western and eastern Europe

Abstract

The impact of Environmental, Social, and Governance (ESG) factors on European company financial performance is investigated in this master’s thesis. As interest in sustainable investment grows, existing literature offers conflicting conclusions about how financial measurements and ESG performance relate to one another. Particularly, no research has been done on regional variations inside Europe. To close this gap, data from 100 companies was analysed, equally split between Western and Eastern Europe. The study focuses on four financial variables using robust regression models to examine the influence of ESG scores. The results show no significant correlations between financial metrics and ESG factors. Western European companies however show better financial stability and ESG performance than their Eastern European competitors. This study highlights the need of regional context in ESGrelated financial performance, therefore offering insightful information to investors and legislators. Future studies should keep investigating these processes, especially with the evolving ESG reporting regulations