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

Adil Haniev, Viktoriya V. Suhih

National Research University Higher School of Economics, Moscow, Russia

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.

Keywords

ESG; LASSO; ROE; stock returns

JEL classification

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About Authors

Adil Haniev

Post-Graduate Student, Basic Department of Financial Markets Infrastructure, Faculty of Economic Sciences, National Research University Higher School of Economics, Moscow, Russia (119049, Moscow, Shabolovka street, 26, building 1); ORCID https://orcid.org/0000-0002-6028-4573 e-mail: adil29x@mail.ru

Viktoriya V. Suhih

Post-Graduate Student, Basic Department of Financial Markets Infrastructure, Faculty of Economic Sciences, National Research University Higher School of Economics, Moscow, Russia (119049, Moscow, Shabolovka street, 26, building 1); ORCID https://orcid.org/0000-0003-0635-2229 e-mail: vsuhih@hse.ru

For citation

Haniev, A., Suhih, V.V. (2025). Analysis of the Impact of ESG Initiatives on the Financial Performance of Shareholders in Russian Companies. Journal of Applied Economic Research, Vol. 24, No. 1, 319-343. https://doi.org/10.15826/vestnik.2025.24.1.011

Article info

Received August 29, 2024; Revised January 13, 2025; Accepted January 22, 2025.

DOI: https://doi.org/10.15826/vestnik.2025.24.1.011

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