Governance and Value: A Disaggregated Environmental, Social, and Governance (ESG) Analysis of Corporate Financial Performance (CFP) in Philippine Publicly Listed Firms

This study investigates the relationship between Environmental, Social, and Governance (ESG) performance and corporate financial performance (CFP) among publicly listed firms in the Philippines from 2015 to 2024. Using Bloomberg's ESG scores, a triangulated econometric framework was employed that combines contemporaneous estimation via Feasible Generalized Least Squares and dynamic panel modeling via the Panel Generalized Method of Moments. The analysis incorporated both aggregated ESG scores and disaggregated pillars—Environmental (E), Social (S), and Governance (G)—and examined their respective impacts across a comprehensive set of CFP indicators, including profitability, liquidity, solvency, efficiency, growth, and market valuation. Results revealed that Governance performance emerged as the most consistently significant predictor, demonstrating positive associations with firm growth and market-based metrics. Governance scores also exerted robust contemporaneous effects, particularly on asset growth and market capitalization. However, social performance exhibited delayed financial implications, with lagged effects primarily influencing profitability indicators in the dynamic panel model. Environmental scores showed limited and less consistent impact, reflecting the underweighting of environmental strategies in firm-level financial outcomes during the period. Meanwhile, macroeconomic variables such as gross domestic product (GDP) growth and the weighted average cost of capital (WACC) were included as moderators. While GDP growth had minimal influence, WACC remained a binding constraint in specific governance-CFP pathways, indicating the persistent role of capital cost management in sustainability-aligned financial decisions. These findings provide actionable insights for corporate managers, investors, and policymakers by highlighting the financial relevance of governance-driven ESG strategies, the time-sensitive value of social investments, and the need to manage capital costs prudently to promote ESG-aligned performance. Comments to this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph.