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The impact of sustainable investment on firm performance in South Africa

Author

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  • Vongani V. Masongweni
  • Beatrice D. Simo-Kengne

Abstract

Purpose: This study investigates the influence of environmental, social, and governance (ESG) scores on the financial performance of firms in South Africa across industries.Motivation: In the context of the growing importance of sustainability reporting, understanding the link between ESG and firm performance is critical for informed and sustainable corporate strategies.Design/Methodology/Approach: The study employs panel data regression techniques on secondary data from 120 Johannesburg Stock Exchange-listed firms between 2015 and 2020.Main Findings: Overall, the composite ESG scores do not significantly affect the financial performance of South African companies. However, scores from social and governance pillars show a positive association with firm performance, while environmental scores have a limited effect.Practical Implications/Managerial Impact: These findings suggest that not all ESG activities are equally relevant for firm profitability. Corporate managers should prioritise industry-relevant ESG pillars to enhance firm profitability.Novelty/Contribution: The study expands empirical evidence in an emerging market context, analysing the impact of disaggregated ESG scores and providing comparative industry-specific analysis. This contributes to a nuanced understanding of the ESG-performance nexus.

Suggested Citation

  • Vongani V. Masongweni & Beatrice D. Simo-Kengne, 2024. "The impact of sustainable investment on firm performance in South Africa," South African Journal of Accounting Research, Taylor & Francis Journals, vol. 38(2), pages 146-173, May.
    • Handle: RePEc:taf:rsarxx:v:38:y:2024:i:2:p:146-173
    DOI: 10.1080/10291954.2024.2306701
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