The issue of sustainability has been a topic of significant concern in the decision making process of corporations in response to mounting pressure on corporations by investors, law enforcers, and stake-holders to act responsibly and with transparency. The Environmental, Social and Governance (ESG) practices have become a common model of measuring the sustainability performance of corporations. ESG indicators evaluate the manner in which organizations handle the effects on the environment, the way they have conscientious relations with employees and communities, and the framework of governance that fosters accountability and transparency (Yu et al., 2024). The use of ESG metrics has gained popularity in the investment appraisal of financial markets, and this marks a transition to responsible and sustainable investment approaches. The growing focus on the ESG performance has affected the ways through which companies assess their long-term strategies and practice (Wang et al., 2023). Some of the environ-mental initiatives that can be used to minimize the operational costs and risks associated with regulations include effective use of resource and management of emissions (Wen et al., 2023). Corporate reputation and the trust by stakeholders can be reinforced with a set of social practices that facilitate employee welfare, customer relations, and community involvement (Walecka-Jankowska et al., 2025). The governmental systems focusing on transparency, accountability, and efficient board control can enhance the managerial discipline and trust of the investors (Aloulou and Alshohail, 2026). These considerations imply that companies with high ESG performance could be able to have better financial results based on increased operational efficiency, foster better stakeholder relationships, and manage risks better (Detthamrong et al., 2026). The connection between ESG performance and financial performance is a subject that has been increasingly explored in scholarly publications. Many studies indicate that high-quality ESG practices are linked to the better economic profitability of the corporation and the value of the firm (Burinskiene et al., 2025; Kim and Li, 2021). Companies which incorporate the ideas of sustainability into their work can achieve improved resource management, improved reputation and increased investor trust. Nonetheless, there are still discrepancies in empirical results in various markets and industries. There are studies that indicate strong positive correlation amidst ESG performance and financial measures (Burinskiene et al., 2025; Detthamrong et al., 2026; Kim and Li, 2021), and there are studies that are weak or insignificant (Aupperle et al., 1985; McWilliams and Siegel, 2000; Pinca et al., 2024).

The ESG performance is of particular significance to emerging markets, where the sustainability regulations and corporate governance customs are developing. Sustainability reporting and corporate governance reforms have taken a more prominent role in the Philippines as companies are reacting to global sustainability trends and investor expectations. Over the past few years, companies that are listed on Philippine Stock Exchange have slowly incorporated sustainability disclosures and initiatives relating to ESG. The need of ESG performance in the Philippine capital market has been further reinforced by regulatory developments that promote transparency and responsible corporate behavior in the market. Even though there is growing interest in sustainability practices within Philippine corporate world, there is limited empirical research in studying the correlation between ESG performance and firm financial performance. A variety of already available research works are on the developed markets, where sustainability reporting and integration of ESG have a longer history. The literature on ESG practices in the emerging economies like the Philippines is relatively limited especially research studies that focus on firm level ESG scores and financial performance indicators over a number of years. The lack of empirical research on the Philippine context creates a knowledge gap on whether sustainability practices result in quantitative financial performance among publicly listed companies (Bari et al., 2021).

The lack of empirical evidence of ESG-financial performance relationships in the Philippine market identifies the importance of exploring the subject. The analysis of the role of ESG dimensions in corporate profitability can offer useful information to investors, corporate managers, and policymakers willing to discover the economic impact of sustainable business operations. The comparison of the firm-level ESG scores and financial performance indicators over a number of years can also provide a more broad view on the possible financial advantages that responsible corporate behavior can bring. This paper focuses on the association that exists between Environmental, Social, and Governance performance and the financial performance of the sampled publicly listed companies in the Philippines. The ESG performance is measured on the basis of the Environmental, Social, Governance and composite ESG scores between 2021 and 2024. The measurement of financial performance is based on Return on Assets (ROA) and Return on Equity (ROE) that show corporate profitability and efficiency in the utilization of corporate assets and shareholder investments. The research also ascertains the existence of significant relationships between ESG performance and financial performance and the ESG dimensions that cause a significant impact on the financial performance of corporations. The study results add to the growing literature on the topic of corporate sustainability and financial performance in the emerging markets and they may also offer information that can be relevant to investors and corporate decision-makers with the Philippine setting.

Environmental, Social, and Governance (ESG) Performance

Environmental, Social, and Governance (ESG) performance has emerged as a significant model to examine the sustainability of corporations, ethical performance, and organizational sustainability in the long-term. The ESG metrics evaluate how companies handle the environmental effects, liability to their stakeholders, and adopting the governance frameworks that encourage accountability and transparency (Yoo, 2025). The environmental aspect is concentrated on corporate activities concerning the environmental management aspects of resource efficiency, energy use, waste disposal, pollution reduction, and climate-based programs to minimize environmental footprints (Tylzanowski et al., 2023). The social aspect assesses the way that companies deal with people, clients, providers, and society, such as labor standards, safety at the workplace, adherence to human rights, diversity, and inclusion, client welfare, and community involvement initiatives (Wang et al., 2022). Governance is defined as systems and structures that inform corporate decision-making such as board composition and independence, shareholder rights, executive compensation, transparency, and structural internal control systems that guarantee responsible management (Mohd Noor et al., 2022).

Good ESG performance denotes the success of a firm to strike a balance between economic aspirations and environmental custodianship and social responsibility whilst sustaining good governance mechanisms. The rise in the adoption of ESG metrics in financial markets is a sign of mounting awareness of the fact that sustainability practices could affect the reputation of corporations, risk management, and the long-term value creation. Better stakeholder trust and greater corporate legitimacy are the other aspects of ESG that may reinforce organizational sustainability within competitive markets (Febe Christine et al., 2025; Handoyo & Anas, 2024; Nabila et al., 2022; Mendonca et al., 2025).

Corporate Financial Performance: Return on Assets and Return on Equity

Corporate financial performance indicates the capacity of the firms to make profits and to put effective use of the available resources. ROA and ROE are considered to be among the most popular metrics of the profitability of firms (Apergis and Sorros, 2014; Nguyen et al., 2023; Nunes et al., 2019). ROA is a measure of how effectively a company uses its total assets to earn profits that give an indication of the effectiveness of operations and how well it manages its assets (Gyau et al., 2024). ROE measures the ability of the company to make profits in relation to the shareholders equity, and indicates the returns to the investors and the efficiency of the management to use the shareholder capital (Ichsani and Suhardi, 2015). These are financial indicators that are prevalent in corporate finance and empirical research to measure the performance and profitability of firms in different industries and markets. These ratios are often useful to financial analysts and researchers since they offer standardized outcomes on how to compare the profitability of corporations by firms and over time. Earlier literature highlights that ROA measures operational effectiveness in using assets (Yu, 2024), and ROE is the means of assessing the financial returns given to shareholders (Chen et al., 2025) and the two metrics are complementary measures of company performance when evaluating sustainability and financial performance in the studies of the research (Dao & Ta, 2020; Lau, 2016; Rodriguez Valencia, 2025).

Relationship between ESG Performance and Financial Performance

Some studies indicate that a high ESG performance may help in generating better financial performance by increasing efficiency in its operations, improve how it manages risks, and how it relates with its stakeholders (Moussa et al., 2024; Shmelev & Gilardi, 2025; Wang et al., 2023). Companies that incorporate environmental sustainability, responsible social practices, and proper governance systems can enjoy lower regulatory risks, good reputation, and confidence by investors (Handoyo & Anas, 2024; Lunawat et al., 2025). Cost savings, better brand image, and availability of responsible investment capital may also be a benefit of sustainable practices that leads to the creation of long-term value (Li and Khan, 2025). In a significant meta-analysis study by Friede et al. (2015) that examined over 2,000 empirical studies, the authors found out that most of the research results show that ESG performance is positively related to corporate financial performance. Orlitzky et al. (2003) have reported similar results as they have found that the corporate social responsibility is positively correlated with financial performance and that corporate responsible conduct has the potential to produce social and economic returns.

Influence of ESG Dimensions on Corporate Financial Performance

The environmental, social and governance aspects of ESG performance are individual factors that may impact corporate financial performance in a varied manner. Wu et al. (2025) posed that sustainability programs like resource management, energy saving and reduction of pollution can help in reducing operating expenses and regulatory risks, which can enhance corporate profitability. Practices that are socially oriented and focus on the welfare of the employees, the satisfaction of the customers, and ethical supply chain management and community involvement can help in building a stronger organization reputation and stakeholder trust that may lead to the overall increase in employee productivity and long-term sustainability of the business (Walecka-Jankowska et al., 2025). Mechanisms of governance that ensure enhanced transparency, accountability and efficient oversight by the board are linked to better managerial discipline and less agency remain between the managers and the shareholders (Abudu & Salman, 2025). Empirical studies have revealed that there is usually a close relationship between governance practices and financial performance because of their direct effect on corporate management and strategic decision - making (Dzingai & Fakoya, 2017). Moreover, well-functioning governance frameworks help to manage risks, internal control mechanisms, and strategic orientation in organizations, which helps to improve stability of firms in general and financial performance (Luo et al., 2024). Research also reveals that good board independence, which is manifested through transparency in reports, and a clear accountability framework give firms a more informative and accountable financial decision-making (Huang et al., 2024).

Research Questions

This study aims to examine the relationship between Environmental, Social, and Governance (ESG) performance and the financial performance of selected publicly listed companies in the Philippines.

1. What is the ESG performance of the selected companies in the Philippines from 2021 to 2024 in terms of:

• Environmental score
• Social score
• Governance score
• Composite ESG score

2. What is the financial performance of the selected companies from 2021 to 2024 in terms of:

• Return on Assets (ROA)
• Return on Equity (ROE)

3. Is there a significant relationship between ESG performance and financial performance of the selected companies?

4. Which ESG dimensions significantly influence the financial performance of the selected companies?

Research Design

The research design used in this study was a quantitative correlational research design, which was used to test the relationship between the levels of Environmental, Social, and Governance (ESG) performance and the financial performance of publicly listed companies in the Philippines. The study adopted a secondary data analysis method, which utilizes the current ESG ratings and financial performance indices, which are available in the reputable financial database. The data used in the study was based on the panel data structure that spans four years (2021-2024). 

The unit of analysis was each firm-year and thus an equal panel dataset was obtained which comprised of 88 observations which were based on 22 firms that were followed over four years. The correlational design was considered suitable due to the purpose of the study since the researcher seeks to establish the statistical relationship and predictive power of ESG performance with corporate financial results without controlling any variables. The design will enable the researchers to examine how changes in the ESG scores relate to variations in the financial performance indicators among firms over time.

Sources of Data

The research relied on the secondary data collected in the form of reliable financial databases and publicly available companies information. The database of the London Stock Exchange Group (LSEG) was used to get ESG scores, such as Environmental, Social, Governance, and composite ESG performance indicators, which are standardized ESG indices used in academic and financial studies. The financial performance indicators such as Return on Assets (ROA), and Return on Equity (ROE) were collected based on the financial disclosure as well as the market data provided by the Philippine Stock Exchange. It was decided to use four years between 2021 and 2024 as the sample size includes 22 publicly listed companies. It is important to note that despite the fact that the companies that did not have a score on one or more of the dimensions of ESG were not included in the analysis in order to guarantee the reliability and completeness of the results.

Ethical Consideration

This paper followed the set standards of ethics in is the use of secondary data in research. All the data used in the analysis was also collected through the legitimate and publicly available financial databases, such as the London Stock Exchange Group and the Philippine Stock Exchange. The data sources were properly credited and referenced in the course of research to give credit to the primary providers of the information. The researchers ensured data recording, data proces-sing and data analysis accuracy and integrity to avoid any data misrepresentation and manipulation of the same. As the study was based solely on the publicly available corporate financial information and ESG ratings, it did not involve a confidential source of information or personal data, which guaranteed that this research met the ethical principles of conducting academic research.

Measures

The statistical analysis of the study variables was conducted using established quantitative procedures to examine the relationships between ESG performance and financial performance. ESG performance was measured by the use of scores of the Environmental, Social, and Governance and a composite ESG score and only those companies that reported the full data of all the dimensions considered were taken in the sample. Return on Assets (ROA) and Return on Equity (ROE) were used as financial performance indicators of operational efficiency and returns to the shareholder. 

The Shapiro-Wilk test was used to test the normality of the variables, and Multi-Collinearity among the predictors was tested with the help of the Variance Inflation Factor (VIF) statistics. Pearson correlation was also used to test the correlation between ESG dimensions and financial performance. In addition, predictive correlations were also examined through multiple linear regression between ESG dimensions and financial performance (ROA and ROE) and reported regression coefficients, standard errors, beta, model statistical values to confirm reliability and analytical rigor of the study measures. Those processes made the measures reliable, valid, and analytically sound estimates of the relationships between ESG practices and corporate financial performance.

Table 1 shows the descriptive statistics of 2021-2024 Environmental, Social, Governance, and composite ESG scores of the chosen companies. The Environmental score has an average of 46.11 (SD = 19.71) and the range was 5 to 94.

Table 1: Descriptive Statistics of ESG Scores of Selected Companies (2021–2024).

The standard deviation is not very high and the range of the standard deviation is quite wide, suggesting that there are significant differences in environmental practices among the companies. There are firms that are highly performing in terms of environmental performance and those whose scores are significantly lower. The Social dimension registered the best mean of the ESG components at 60.57 (SD = 12.70) with a score between 31 and 87. The increased average indicates that most of the companies are more concerned about social activity which includes employee relations, community involvement, and welfare of their stakeholders. Therefore, Governance scores yielded a mean of 49.98 (SD = 24.36), and the lowest score of 5 and the highest score of 92. The huge disparity indicates the differences in corporate governance models, transparency models, and board supervision among the companies. The composite ESG score produced a mean score of 53.17 (SD = 14.32) and the scores ranged between 25 and 82. These values show that the selected companies moderately performed in terms of their ESGs within the time frame of the study. The score distributions also indicate that the adoption of ESG has significant differences between firms with greater focus on the social dimension compared to the environment and governance factors.

Table 2: Descriptive Statistics of Financial Performance of Selected Companies (2021–2024).

Table 2 shows the descriptive statistics of the financial performance of the chosen companies between 2021 and 2024 calculated in terms of Return on Assets (ROA) and Return on Equity (ROE). ROA presents the mean of 4.36 (SD = 3.84) and the values of -4 to 21. The negative minimum figure implies that there were firms that made losses or had to go through phases of poor utilization of assets at that that time, other firms can use their assets to make higher profits. The dissemination of the values implies observable variations in the rate at which the companies utilized their assets to generate earnings within the period of the study.

The average ROE was 12.56 (SD = 9.96), with the range of -14 to 52. The wider scope and increased standard deviation implies that there was a higher fluctuation in the returns made to shareholders. Negative ROE values are used when companies suffered financial losses and shareholders suffered a drop in their returns and the high maximum value indicates that some companies made good profits vis-a-vis equity. These findings show that financial performance of the sampled businesses is significantly different, showing disparity in financial performance and profitability of the firms and years.

Normality of the variables was examined using the Shapiro–Wilk test. The results showed that Environmental (p = .056), Social (p = .338), and Composite ESG Score (p = .090) were approximately normally distributed, while Governance (p = .006), ROA (p < .001), and ROE (p < .001) deviated from normality. Despite these deviations, parametric analyses such as Pearson correlation and multiple regression were retained because these techniques are considered robust to moderate violations of normality when the sample size is sufficiently large (N = 88) (Hair et al., 2019). 

Table 3: Pearson r Correlation Analysis between ESG Performance and Financial Performance.

Moreover, regression analysis primarily assumes normality of the residuals rather than the raw variables themselves. With a sample size greater than 30, the sampling distribution tends to approximate normality based on the central limit theorem. Therefore, the use of parametric statistical procedures was deemed appropriate for the present study.

Pearson correlation analysis was conducted to examine the relationship between ESG performance and financial performance of the selected companies. As shown in Table 3, the composite ESG score did not show a statistically significant correlation with ROA (r = −.10, p = .354) or ROE (r = .133, p = .217). Environmental, Social, and Governance scores also did not exhibit significant correlations with either financial indicator. Strong positive correlations were observed among the ESG dimensions, with Environmental, Social, and Governance scores significantly associated with the composite ESG score (r = .734 - .807, p < .01). ROA and ROE demonstrated a strong positive correlation (r = .720, p < .01). These results indicate that ESG performance, as measured in this study, does not have a significant relationship with financial performance in the selected Philippine companies during 2021–2024.

Table 4: Model Summary for Multiple Regressions Predicting Return on Assets (ROA).

Note. Predictors: Environmental, Social, Governance; Dependent variable: ROA.

Table 5: ANOVA for Multiple Regressions Predicting Return on Assets (ROA).

Note. Dependent variable: ROA; Predictors: Environmental, Social, Governance.

Table 6: Regression Coefficients and Collinearity Statistics for Return on Assets (ROA).

Note. Dependent variable: ROA; SE = standard error; β = standardized coefficient; VIF = variance inflation factor.

 

Multiple linear regressions were conducted to determine whether ESG dimensions significantly predict ROA in the selected Philippine companies (see Table 4, 5, and 6). The regression model was not statistically significant (R² = .011, F(3, 84) = .317, p = .813), indicating that the predictors collectively explained only 1.1% of the variance in ROA. Examination of the regression coefficients revealed that Environmental (B = .015, p = .620), Social (B = −.042, p = .337), and Governance (B = .000035, p = .999) were not significant predictors of ROA. Collinearity diagnostics indicated low VIF values (1.224–1.988), suggesting no multicollinearity concerns. These findings indicate that none of the ESG dimensions significantly influence financial performance, as measured by ROA, among the selected companies during 2021–2024. The findings are supported by studies in emerging markets where ESG performance did not show a significant direct relationship with firm profitability (Deng, 2024; Aupperle et al., 1985), suggesting that ESG practices may not immediately translate into financial gains.

Based on the coefficients, the regression equation for predicting ROA is:

YROA = B0  +  β1 (Environmental)  +  β2 (Social)  +  β3 (Governance)

YROA = 6.219 + 0.015(Environmental) −0.042(Social) + 0.000035(Governance)

YROA = predicted Return on Assets

B0 = constant/intercept

Β1, β2, β3 = unstandardized regression coefficients

 

Table 7: Model Summary for Multiple Regression Predicting Return on Equity (ROE).

Note. Predictors: Environmental, Social, Governance; Dependent variable: ROE.

Table 8: ANOVA for Multiple Regression Predicting Return on Equity (ROE).

Note. Dependent variable: ROE; Predictors: Environmental, Social, Governance.

Table 9: Regression Coefficients and Collinearity Statistics for Return on Equity (ROE).

Note. Dependent variable: ROE; SE = standard error; β = standardized coefficient; VIF = variance inflation factor.

Multiple linear regressions were conducted to determine whether ESG dimensions significantly predict ROE in the selected Philippine companies (see Table 7, 8, and 9). The regression model was not statistically significant (R² = .033, F(3, 84) = .954, p = .419), indicating that the predictors collectively explained only 3.3% of the variance in ROE. Examination of the regression coefficients revealed that Environmental (B = −.002, p = .981), Social (B = .092, p = .412), and Governance (B = .046, p = .344) were not significant predictors of ROE. Collinearity diagnostics indicated low VIF values ranging from 1.224 to 1.988, suggesting no multicollinearity concerns among the predictors. Thus, these results indicate that the Environmental, Social, and Governance dimensions do not significantly influence financial performance as measured by ROE among the selected companies during the period 2021–2024. The findings are supported by prior research indicating that ESG performance does not always exhibit a significant relationship with short-term financial performance, particularly in emerging markets where ESG integration may still be developing (Liu et al., 2022).

Based on the coefficients, the regression equation for predicting ROE is:

YROE = B0  +  β1 (Environmental)  +  β2 (Social)  +  β3 (Governance)

YROE = 4.758 −0.002(Environmental) + 0.092(Social) + 0.046(Governance)

YROE = predicted Return on Equity

B0 = constant/intercept

Β1, β2, β3 = unstandardized regression coefficients

The findings of this study indicate that ESG performance, measured through Environmental, Social, and Governance dimensions as well as the composite ESG score, does not have a significant effect on the financial performance of publicly listed Philippine companies between 2021 and 2024. Pearson correlation analyses showed no statistically significant relationships between any ESG dimension or the composite score and either ROA or ROE. Multiple linear regression results confirmed that Environmental, Social, and Governance scores were not significant predictors of ROA or ROE. Examination of the regression coefficients revealed minimal effect sizes, with none of the ESG components demonstrating a measurable contribution to profitability during the study period. Multicollinearity diagnostics indicated low interdependence among ESG predictors, confirming that the non-significant findings were not due to overlapping constructs. The descriptive analysis highlights that Social scores were generally higher than Environmental and Governance scores, while Governance exhibited the greatest variation across companies. Despite these differences in ESG adoption levels, the variation did not translate into differences in financial outcomes. Financial performance itself varied considerably, with some firms reporting negative ROA and ROE, further indicating that other operational or market factors likely influence profitability more strongly than ESG performance. These results suggest that, in the context of the Philippine capital market during 2021–2024, ESG initiatives do not have an immediate impact on corporate profitability, and firms with stronger ESG practices did not necessarily achieve higher returns on assets or equity. The study provides empirical evidence that ESG performance, while relevant for sustainability considerations, may not directly correlate with short-term financial gains among Philippine publicly listed companies.

This study utilized secondary data obtained from publicly available sources. The study adhered to institutional guidelines for the ethical use of publicly accessible data.

J.M.P.: was responsible for statistical analysis, data interpretation, and the preparation of references. R.F.R.G.M.; and C.A.V.M.: conducted the data gathering of secondary data from LSEG and performed data cleaning. S.K.:  and A.S.T.L.:  formulated the research questions and conducted the review of related literature. J.C.:  contributed to the formulation of research questions and the development of research materials and methods. R.L.:  was responsible for the conclusions and ethics review.

The researchers sincerely acknowledge the authors and sources of secondary data utilized in this study for their valuable contributions to the completion of this research.

The researchers declare that there is no conflict of interest in the conduct of this study.