THE IMPACT OF ESG RATINGS ON CORPORATE PERFORMANCE: AN EMPIRICAL ANALYSIS

The objective of the research was to analyze the impact of ESG scores on the value of companies and their profitability. The first chapter highlighted the legislative interventions put in place by government agencies to ensure that industries are environmental friendly, given the many problems related to climate change. It also described the phenomenon of greenwashing that institutions are limiting through the establishment of green bonds, which, starting from 2023, guarantee the transparency of companies in the presentation of projects subject to financing. In the second chapter, the different ESG ratings were analyzed, all the methodologies that lead to the calculation of individual ratings and the overall rating, with an eye on the rating published by Refinitiv, which was used to conduct the analyses in Chapter 3. The sample used for the analyses conducted in the last chapter includes the 500 companies that are part of the S&P 500 index, and the data consider the period 2016-2021. Panel data fixed effect models were used for all the dependent variables, namely Tobin's Q, ROI, and ROA. The following independent variables were used: the overall ESG rating, the ESG environmental rating, the ESG social rating and the ESG governance rating. The ROE, size and leverage of the companies studied were used as control variables. A total of twelve models were developed, four for each dependent variable, each of which relates to a different ESG rating. Data was downloaded from Workspace and analyzed using RStudio software. The research questions of the analysis were the following: 1. Is there a statistically significant relationship between ESG score and corporate performance as defined by ROA? 2. Is there a statistically significant relationship between ESG score and corporate performance as defined by Tobin's Q? 3. Is there a statistically significant relationship between ESG score and corporate performance as defined by ROI? In all three cases, a significant relationship having a positive sign was found between total or individual ESG scores, and the three dependent variables considered that measure firm value (Tobin's Q) and firm profitability (ROI, ROA). Except for the ESG governance rating which assumes a statistically significant and positive value exclusively in the model with ROI as the dependent variable. The results achieved allows us to state that, for the sample analyzed, firms with higher ESG scores have higher firm value and higher profitability.