The Impact of ESG Performance on Financial Performance: Evidence from Listed Companies in Thailand

Sustainable corporate governance plays an essential role in promoting responsible economic growth and enhancing social and environmental well-being in emerging economies. In this context, Environmental, Social, and Governance (ESG) performance has become an important indicator of a firm’s commitment to sustainable development and its alignment with the United Nations Sustainable Development Goals, particularly SDG 8 and SDG 12. This study investigates the impact of Environmental, Social, and Governance (ESG) performance on the financial sustainability of publicly listed companies in Thailand, a rapidly developing Southeast Asian economy where empirical evidence remains limited. Using an unbalanced panel dataset of 965 firm-year observations across multiple industries, multiple regression models were employed to assess the influence of ESG performance on two financial indicators: return on capital employed and return on assets. Granger causality tests were also conducted to explore directional relationships between sustainability performance and financial outcomes. The empirical results reveal a significant negative short-term association between ESG performance and return on assets (ROA), whereas the relationship with return on capital employed (ROCE) is statistically insignificant. The causality analysis indicates that ESG performance Granger-causes ROA, implying that sustainability-driven strategic decisions may precede and influence financial outcomes over time. Additionally, leverage emerges as a key constraint to financial sustainability, negatively affecting both ROCE and ROA. These findings underscore the challenge of striking a balance between sustainability investments and immediate profitability in emerging markets. Policymakers and business leaders are encouraged to promote supportive governance frameworks, reduce financial barriers, and foster ESG-driven practices that contribute to long-term sustainable competitiveness and inclusive development.