Assessing the imbalance in interaction between ESG rating indicators and the financial performance of companies

Abstract

Subject. This article examines the interdependence between the key financial indicators of companies and the rating assessment of sustainable development (ESG rating). Objectives. The article aims to determine the interdependence between the key indicators of the financial condition of companies and the ESG rating, and identify the factors that affect the correlation and assessment of the imbalance of the rating, sales and EBITDA indicators, for the further development of a unified ESG rating. Methods. For the study, I used an integrated approach to testing the impact of quantities, analyzing and approbation of the results, based on structural and regression analyses, and statistical sampling. Results. The article proposes a methodology for the practical application of the assigned rating to assess the financial condition of the company. The results of the study confirm the hypothesis about the connection and mutual influence of the ESG rating assessment and the main financial indicators (sales volume and EBITDA). It determines that when industries and companies are stratified by range depending on the scale of activity, an imbalance in the comprehensive ESG rating assessment gets revealed, which contradicts the essence of any rating. Conclusions. The article concludes that the ESG rating is primarily a qualitative indicator, which is determined by a point system based on financial and non-financial information about the activities of companies. The sustainability rating can affect the performance of companies and industries as a whole, but it also depends on the financial condition of companies. It is necessary to unify the approach to compiling a rating assessment and building rating models using dilution coefficients adapted to different types of companies' activities and adequately disclosing ESG principles.