Published Online:January 2025
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP040125
DOI:10.71329/IUPJARAP/2025.24.1.54-67
Author Name:Kabir Sharma and Pratibha Rai
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:54-67
The paper investigates the relationship between environmental, social and governance (ESG) scores and financial performance in Indian public sector oil marketing companies (OMCs). A comprehensive literature review highlights the positive impact of ESG practices on financial outcomes, the superiority of ESG integration to negative screening, and the potential of ESG investments to provide downside protection during economic crises. The empirical analysis focuses on key financial indicators, namely, Return on Equity (ROE), Return on Capital Employed (ROCE) and Return on Assets (ROA), and their relationship with ESG scores over a two-year (2020-21 and 2021-22) dataset. The regression analysis reveals that due to the limited sample size, only one scenario shows a statistically significant association between financial performance and social performance score. The study acknowledges its limitations, primarily related to the small sample size, and proposes recommendations for future research, including larger data samples, longitudinal studies, and qualitative analysis to gain deeper insights. However, the valuable insights offered by the study into the influence of ESG practices on the financial performance of Indian OMCs will be of help to diverse stakeholders, including investors, policymakers, and oil and gas companies.
Environmental, social and governance (ESG) considerations have caused a significant change in consumer behavior and investing practices in recent years. The focus on sustainability has significantly impacted investors’ choices and decisions (Friede et al., 2015; Bocconi Students Capital Markets, 2021; and Al Amosh et al., 2023).