Study of Corporate Sustainability, ESG Integration and Financial Valuation of Companies in The Indian Scenario
DOI:
https://doi.org/10.68219/a3zgq955Keywords:
ESG integration, emerging markets, financial valuation, corporate sustainability, India, firm valueAbstract
The paper explores how the integration of ESG and financial valuation are connected in the Indian corporate sector, a key emerging growth market, characterized by fast economic development and growing sustainability practices. Using empirical analysis of 150 listed companies on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) from 2018–2023, the study examined the correlation between the adoption of ESG with the valuation indicators of the firms, such as Price-to-Earnings (P/E) ratios, Enterprise Value-to-EBITDA multiples, and Returns on Equity (ROE). The results show that the correlation between comprehensive ESG integration and financial valuation is statistically significant, and the average valuation premium is 18-24% for the top ESG quartile of firms, compared to the bottom quartile. But it is subject to sector dynamics, regulatory environment and investors. The study also show that governance dimensions are most important in the valuation results, followed by environmental and social dimensions. The paper joins emerging market literature by shedding light on the financial materiality of ESG factors in an emerging market that is sensitive to regulation and offers practical advice for corporate strategists to consider as they integrate sustainability into their business strategies in emerging markets.
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