A Study of the Relationship Between ESG Performance and Firm Valuation

Abstract

This study aims to explore the impact of environmental, social, and governance (ESG) factors on company valuation, providing in-depth analysis from multiple perspectives, including investor expectations, risk management, long-term strategy and brand building, and cost-effectiveness. With the increasing importance of ESG factors in investment decisions, there is a growing demand for sustainable and responsible investments, and strong ESG performance has been shown to have a positive impact on valuation. Additionally, this study analyzes ESG risks and their potential effects on valuation, highlighting effective risk management strategies and explores how environmental sustainability can reduce regulatory risks. Furthermore, the study delves into the relationship between ESG factors and long-term strategy, brand reputation, and cost-effectiveness, supported by empirical research and case studies. Finally, the study summarizes insights for companies and provides recommendations for strategically integrating ESG practices while also discussing future research directions in the field of ESG and valuation. The findings of this study are expected to provide valuable guidance for companies in formulating strategies in ESG practices, promoting sustainable value creation.