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Analysis of the Impact of ESG Initiatives on the Financial Performance of Shareholders in Russian Companies

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  • Adil Haniev
  • Viktoriya V. Suhih

Abstract

This study examines the impact of ESG indicators on the financial well-being of shareholders in Russian companies. Using data from publicly traded non-financial companies in Russia for the period 2018–2023, the analysis focuses on the overall ESG rating and its components – environmental (E), social (S), and governance (G) – in the context of their influence on Return on Equity (ROE) and stock returns. The research hypotheses suggest that each indicator exerts a positive impact. Two regression analysis methods were applied: the traditional Ordinary Least Squares (OLS) method and LASSO regression. The latter accounts for the influence of correlated factors. The results revealed that the social component (S Rank) has a positive impact on Return on Equity (ROE). This underscores the importance of social initiatives in enhancing corporate performance by strengthening the company’s reputation and increasing employee motivation. At the same time, the environmental (E Rank) and governance (G Rank) components demonstrate a negative impact on stock returns. This effect can be attributed to significant costs associated with implementing environmental programs and the focus of governance decisions on long-term sustainability, which reduces their appeal to investors seeking short-term profits. The overall ESG rating did not show a statistically significant impact on either ROE or stock returns, highlighting the importance of a differentiated approach to analyzing the influence of ESG indicators on a company’s financial performance. For companies aiming for sustainable development, it is essential to consider both the potential benefits and risks associated with each ESG aspect to strike a balance between financial performance and corporate responsibility. The theoretical contribution of this study lies in providing new empirical data on the relationship between ESG indicators and key financial metrics, deepening the understanding of the role of environmental, social, and governance factors in shaping operational and market performance. The practical significance of the study is that its findings can be used by managers and investors to make more balanced and informed decisions.

Suggested Citation

  • Adil Haniev & Viktoriya V. Suhih, 2025. "Analysis of the Impact of ESG Initiatives on the Financial Performance of Shareholders in Russian Companies," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 24(1), pages 319-343.
    • Handle: RePEc:aiy:jnjaer:v:24:y:2025:i:1:p:319-343
    DOI: https://doi.org/10.15826/vestnik.2025.24.1.011
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    More about this item

    Keywords

    ESG; LASSO; ROE; stock returns;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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