The impact of ESG on financial performance in Nordic countries
Rautanen, Julia (2025-05-12)
J. Rautanen
12.05.2025
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:oulu-202505123302
https://urn.fi/URN:NBN:fi:oulu-202505123302
Tiivistelmä
Sustainability is a topic that has increased interest in recent years. As public awareness has grown, companies have faced pressure from both society and investors to address sustainability issues. In addition, legislation is constantly evolving and requires companies to report these matters in more detail. In a corporate world ESG is a term that covers the environmental, social and governance sustainability issues. These themes form a basis for the ESG score, which measures a company’s efforts towards sustainability.
The aim of this study is to investigate does ESG score have an impact on financial performance in Nordic countries. This relationship has been studied across different markets, but the results have been inconsistent. Some have found a positive impact, but many have also ended up with a negative or neutral relationship. The topic is interesting to investigate especially in Nordic countries that have been considered as leaders in sustainability issues.
The data is collected from Swedish, Finnish, Norwegian and Danish listed companies over the period 2017-2023. All data is collected from LSEG database. The study uses unbalanced panel data and applies a panel regression model to investigate the relationship between ESG and financial performance. Financial performance is measured by an accounting-based measure ROA and a market-based measure Tobin’s Q. Also, control variables size, leverage and beta are included in the model. In addition to the overall ESG score, the study separately examines the impact of environmental, social and governance (ESG pillar) scores on financial performance.
The results indicate no statistically significant relationship between overall ESG score and financial performance, measured by both ROA and Tobin’s Q. Therefore, the relationship remains neutral. Likewise, ESG pillar scores also showed mainly a neutral relationship. The only exception is the relationship between the governance pillar score and Tobin’s Q, where a slightly positive and statistically significant relationship was found. Based on that, it can be concluded that investors in Nordic countries appreciate good corporate governance. Additionally, companies in these countries share strong institutional and cultural support for ESG practices, which is reflected to the business models.
This study contributes to the existing research by focusing on the Nordic countries. More useful information is provided by examining also the impact of ESG pillar scores on financial performance, offering a more detailed understanding of which sustainability aspects have the greatest impact.
The aim of this study is to investigate does ESG score have an impact on financial performance in Nordic countries. This relationship has been studied across different markets, but the results have been inconsistent. Some have found a positive impact, but many have also ended up with a negative or neutral relationship. The topic is interesting to investigate especially in Nordic countries that have been considered as leaders in sustainability issues.
The data is collected from Swedish, Finnish, Norwegian and Danish listed companies over the period 2017-2023. All data is collected from LSEG database. The study uses unbalanced panel data and applies a panel regression model to investigate the relationship between ESG and financial performance. Financial performance is measured by an accounting-based measure ROA and a market-based measure Tobin’s Q. Also, control variables size, leverage and beta are included in the model. In addition to the overall ESG score, the study separately examines the impact of environmental, social and governance (ESG pillar) scores on financial performance.
The results indicate no statistically significant relationship between overall ESG score and financial performance, measured by both ROA and Tobin’s Q. Therefore, the relationship remains neutral. Likewise, ESG pillar scores also showed mainly a neutral relationship. The only exception is the relationship between the governance pillar score and Tobin’s Q, where a slightly positive and statistically significant relationship was found. Based on that, it can be concluded that investors in Nordic countries appreciate good corporate governance. Additionally, companies in these countries share strong institutional and cultural support for ESG practices, which is reflected to the business models.
This study contributes to the existing research by focusing on the Nordic countries. More useful information is provided by examining also the impact of ESG pillar scores on financial performance, offering a more detailed understanding of which sustainability aspects have the greatest impact.
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