The relationship between Environmental Social and Governance (ESG) disclosure and financial performance of South African listed equities

Abstract

The objective was to understand the relationship between environmental, social and governmental (ESG) disclosure and financial performance. An ESG disclosure scorecard enabled a univariate ranked style-based graphical time-series analysis approach to determine associations with share returns. Findings were that portfolios with the highest ranked ESG disclosure had the lowest financial performance whereas the fourth portfolio quintile was found to have the highest CFP. A longer time period for analysis could ensure differentiation between temporary and permanent changes on the dependent variable. This study contributes to ESG literature in South Africa by granulising the metric of analysis using aggregated ESG disclosure scores.