The Effect of Sustainability on the Financial Performance of Businesses

Abstract

The objective of this study is to determine whether or not the amount of information about a company's financial performance has an effect on the level of knowledge about the company's sustainability performance indicators offered by companies in Turkey that issue sustainability reports. To accomplish this, first sustainability scores (ESG) are acquired for the periods of 2019, 2020, 2021. ESG (Environmental, Social, and Governance) scores are used to assess a company's performance in these areas, which are believed to be indicators of long-term financial performance. Research has shown that companies with strong ESG scores tend to have better financial performance, as they are better able to manage risk and capitalize on opportunities. Some investors are incorporating ESG factors into their investment decisions, and some companies are working to improve their ESG scores to appeal to these investors. However, the correlation between ESG scores and financial performance is complex and not all studies have found a strong link between the two. EBIT, Net Profit (Loss), Total Liabilities, Total Assets, Total Equity, ROA and ROE are assessed as a financial indicators in order to investigate the impact of ESG scores on the financial performance of 51 companies listed on the Borsa Istanbul (BIST). The impact is examined through statistical analysis methodology using Gretl software.