ESG Performance and Corporate Profitability: Evidence from Philippine Publicly Listed Companies

This study examines the relationship between Environmental, Social, and Governance (ESG) performance and the financial performance of publicly listed firms in the Philippine stock market from 2021 to 2024, using environmental, social, governance, and overall ESG scores as indicators of ESG performance, and Return on Assets (ROA) and Return on Equity (ROE) as measures of financial performance. The data was analyzed based on a balanced panel sample that included 22 companies and a period of four years, making an 88 observation. Descriptive findings indicate moderate-ESG adoption with Social scores being relatively high compared to the Environmental and Governance score, whereas Governance had the highest variation across firms. The financial performance was not similar with some companies having negative returns. Correlation analysis did not show any significant relationships between ESG dimensions or composite ESG scores with ROA and ROE. Multiple regression investigation demonstrated that the levels of Environmental, Social and Governance did not turn out to be significant predictors of financial performance and the models accounted only minor part of the variance of ROA and ROE. The results suggest that ESG activities among the sampled Philippine firms do not affect profitability in the short term. The findings indicate that in the emerging markets, ESG practices might need additional time, the support of the institutions, or alignment with the strategic decision-making before being converted into the financial benefits. The research adds to the knowledge about the application of ESG in the emerging markets and provides information to the investors and corporate managers who might need to take into consideration sustainability practices in the financial analysis at the firm level.