Assessing the Influence of ESG Factors on Stock Prices: An Analysis of Nifty 50 Companies

Abstract

This study examines the relationship between sustainability reporting, stock performance, and ‘Environmental’, ‘Social’, and ‘Governance’ (ESG) characteristics of Indian companies. The goal is to clarify the influence of environmentally conscious activities on enterprises. This research addresses the lack of knowledge regarding the impact of ESG ratings on stock performance in the Indian market, which has been overlooked in previous studies that mostly focused on the US and European markets. The study employs a quantitative methodology to gather stock prices and ESG ratings for companies in the Nifty 50 index. It then constructs portfolios that reflect the companies with the greatest and lowest ESG scores. The data is examined by OLS regression and Pearson correlation tests, indicating that ESG has a detrimental effect on stock prices in India. This suggests that enhancing ESG scores may not be advantageous for firms. Nevertheless, the study reveals disparities between companies with high and low ESG scores in relation to Sustainable Development Goals (SDGs), regulatory frameworks, anti-corruption initiatives, and ESG methodology. This presents opportunities for Indian businesses to improve their sustainable practices and generate value for stakeholders.

Keywords: Environmental, Social, Governance, ESG, Sustainability, SDGs

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