The impact of ESG factors on Taiwan ETFs’ performance

PurposeThis research aims to investigate the relationship between environmental, social and governance (ESG) factors and the performance of real estate companies before and after the COVID-19 pandemic. By conducting a comprehensive case study analysis, we will explore how real estate companies' adoption of ESG practices has influenced their financial performance, market value and resilience during these uncertain times. The findings of this study will contribute to the existing body of knowledge on the relationship between ESG factors and company performance, specifically within the real estate sector. Moreover, the research outcomes will offer practical implications for real estate companies, investors, policymakers and other stakeholders, aiding them in making informed decisions regarding ESG integration and its potential benefits in uncertain times. Overall, this research aims to shed light on whether ESG factors truly enhance the performance of real estate companies, considering the unique challenges posed by the COVID-19 pandemic and sanctions. By examining the case study before and during uncertain times including COVID-19 pandemic and sanctions, we provide valuable insights into the role of ESG practices in shaping the future of the real estate industry.Design/methodology/approachThe study focuses on the selection process and main model used to investigate the relationship between ESG factors and firm performance. The data is divided into four groups based on ESG quartiles to analyze differences between firms with high and low ESG scores. The Difference-in-Differences (DID) model is employed to assess anomalous returns and stock volatility across different ESG quartiles before and after the COVID-19 pandemic. Panel data models are utilized to study the association between ESG and firm performance, with random effects and fixed effects estimators considered. The study builds a model to analyze the impact of ESG on financial performance indicators, incorporating various factors and control variables. Additionally, the Average Treatment Effect on the Treated (ATET) analysis and DID model are explored to evaluate the causal impact of ESG on firm performance. The study emphasizes the importance of testing for parallel trends to ensure the validity of the ATET analysis and it presents a generalized DID model to examine the relationship between ESG scores and company performance outcomes.FindingsOur study's main conclusions show that, in a world with some degree of stability, ESG not only does not improve but, in some situations, also hurts firms' success. On the other hand, at times of notable worldwide unrest, like the COVID-19 pandemic, firms with better ESG ratings demonstrate exceptional stock market success and a noteworthy ability to rebound from a crisis. Moreover, we note that investors truly prioritize sustainable investments as a risk mitigation strategy in addition to their environmental and social duties only when companies face sufficiently significant risks. The results will highlight the significance of sustainable and responsible investment for investors and provide management with more knowledge to create effective ESG strategies for their companies.Practical implicationsBy incorporating sustainability and responsibility into their operations, businesses may reduce risk, perform better over the long run and benefit society and the environment. As investors come to understand the importance of ESG issues in their decision-making, the global landscape is experiencing a transformation. Therefore, in the era when stakeholders, such as consumers, workers and shareholders, want more responsibility and transparency when it comes to ESG practises, it is crucial that companies should devote their priority to their ESG performance in order to reduce the danger of slipping behind, especially in light of the increasing importance of sustainability issues and changing laws. However, in the case of small-sized firms, investment policies to improve companies’ governance need to be controlled in moderation during the period of stability because it will create financial pressure and leave them without enough resources to cope with negative impacts during uncertain period. In sum, sustainable and ethical investment is not only a fad; rather, it is a vital and unavoidable route for companies looking to prosper in an unpredictable and complicated global environment.Originality/valueThis research study significantly enhances the existing academic discourse surrounding the relationship between ESG factors and firm performance, particularly, in periods of uncertainty. The findings underscore the critical importance for real estate companies to place a greater emphasis on ESG practices in order to not only benefit themselves but also to improve their overall performance and sustainability in the long term. By shedding light on the positive outcomes associated with prioritizing ESG considerations, this study offers valuable insights for real estate firms seeking to enhance their competitive advantage and stakeholder value in today's dynamic business landscape.

This paper investigates the impact of Environmental, Social, and Governance (ESG) factors on asset pricing using a Generalized Method of Moments (GMM) estimation framework. The study aims to determine whether ESG scores are priced in financial markets, influencing risk-adjusted returns of assets. This study analyzes a panel of 100 publicly listed firms of China over a five-year period from 2019 to 2023. The firms are selected based on their availability of ESG scores from leading data providers (MSCI, Bloomberg) and financial data from widely used sources such as Compustat and CRSP. We find a significant negative relationship between ESG scores and excess returns. Specifically, firms with higher ESG ratings tend to exhibit lower excess returns, indicating that investors may accept lower returns in exchange for sustainability and reduced risk exposure. While traditional factors such as the market, size (SMB), and value (HML) continue to play significant roles in asset pricing, ESG factors are shown to influence returns in a manner consistent with risk-reduction theories. This study contributes to the growing literature on ESG investing, providing empirical evidence of ESG's role in asset pricing. The findings suggest that while ESG investing does not necessarily generate superior returns, it offers a risk-reducing strategy that aligns with investor preferences for ethical and sustainable business practices. The paper concludes with implications for investors, policymakers, and future research on the integration of ESG in financial markets.

The awareness regarding Environmental, Social and Governance (ESG) has grown a lot in the recent past years. The paper mainly aims at investigating whether there is an existing relationship between the disclosure by the companies from the industry of Banking and Information Technology based upon Environmental, social and governance framework and the stock performance of the companies of the same industry. The study took variable as the ESG Score and annual share price of the top 5 companies each of Banking and Information Technology present in the NSE ESG INDEX between the FY2014 to FY 2023. The study has used correlation and ANNOVA to analyse the impact that ESG score has upon the share prices of the target companies. We have attained observation through our studies that the relationship that exists between the SDG score of 8 companies out of the 10 companies selected as a sample is significantly positive. This study mainly aims to determines the relationship amongst ESG disclosures and stock prices and if the relationship is positive, negative or neutral. Keyword - ESG disclosure, ESG index, ESG Score, Stock Price, Firm performances

Purpose This study examines the impact of board gender diversity (BGD) on financial performance (FP) and environmental, social and governance (ESG) disclosures, as well as the impact of ESG disclosures on FP. Furthermore, this study investigates the moderating role of ESG disclosures in the relationship between BGD and FP. Design/methodology/approach The sample included data on 60 nonfinancial companies listed on the Abu Dhabi Securities Exchange and the Dubai Financial Market from 2012 to 2021. Data were collected from a Bloomberg Terminal. Dynamic panel data regression was used to study the impact of BGD and ESG on FP. Findings During the voluntary ESG reporting period, the impacts of ENV and GOV on FP were significant, whereas that of ESG was not. BGD improves the FP of listed nonfinancial companies when mandatory ESG disclosure is required. However, this relationship was negatively moderated by ESG during adherence to these requirements. Research limitations/implications It is recommended that nonfinancial companies listed in the United Arab Emirates (UAE) practice a more favorable mechanism to enhance BGD when their ESG scores become weaker. Improving BGD practices for nonfinance companies with strong or increasing ESG scores will not be effective as it may reduce the strength of the existing association between BGD and FP. Practical implications It is recommended that nonfinancial companies listed in the UAE practice a more favorable mechanism to enhance BGD when their ESG scores become weaker. Consequently, such companies can improve FP in terms of an increased market value of shares (Tobin’s Q) when their ESG scores decrease. However, improving BGD practices for nonfinance companies with strong or increasing ESG scores will not be effective because it may reduce the strength of the existing association between BGD and FP. Originality/value To the best of the authors’ knowledge, this is the first study to find a negative moderating role of ESG in the relationship between BGD and FP, particularly during mandatory ESG reporting requirements.

Environmental, social and governance (ESG) criteria mean investment in economic choices which, without interference with the environment, are intended to promote long-term economic and social well-being. Due to high environmental and social awareness, customers expect companies to devote time and efforts to such sustainable practices. This attitude has led to an overall rise in ESG disclosures and reporting instruments globally with a focus on influence of ESG disclosures on financial performance of companies. Many European countries have already introduced mandatory disclosure of non-financial information. This transition from voluntary to mandatory motivated other countries to adopt mandatory ESG disclosure practices for sustainable development. The practice of reporting non-financial disclosures has been rising due to several reasons, such as increasing visibility, informing customers, avoiding the risk associated with firm performance and achieving sustainability. Countries in the early stages of ESG disclosure need to understand the benchmark practices used by countries with a well-developed ESG system. For preparing the ESG disclosure index and benchmarking based on disclosure score, this study considers a set of developed and developing countries with their ESG disclosures. On the basis of ESG disclosures, the countries have been classified into four different categories. We found Norway, Sweden, Denmark, Finland, United Kingdom, Belgium and France, to have high ESG scores and have been classified as Countries with Well-Developed ESG Framework. Germany, Italy, USA, Australia, Switzerland, Canada, Japan, Brazil and South Africa have medium to high ESG scores and fall under the category Rapidly improving ESG framework. While Singapore, India, China, Philippines, Malaysia and Argentina are categorized as countries with ESG framework at developing stage, Russia, Indonesia, Thailand, Nigeria and Vietnam are classified as Countries with early-stage framework due to low ESG scores.

Purpose: By linking verified non-compliance of financial outcomes disclosures with non-verified disclosures of information related to social and environmental outcomes, we can assess their relationship and gain insight into the potential incentives driving Environmental, Social and Governance (ESG) disclosures. The aim of this study is to assess the credibility of non-financial reporting by examining whether companies that demonstrate greater compliance with ESG disclosure requirements also place more emphasis on "true and fair" or "fair" financial reporting. Methodology/approach: The study analyzed a sample of listed companies for the peri-od from 2019 to 2022, using a logistic regression with a modified audit opinion as the outcome variable and the ESG score as the primary explanatory variable. Findings: The results show a negative relationship between ESG disclosure scores and modified audit opinions, suggesting that companies with lower ESG disclosure scores are more likely to receive a modified audit opinion. Companies with higher ESG scores are less likely to receive a modified audit opinion than other companies. In addition to ESG scores, a modified audit opinion is also significantly related to the Big Four, profitability and solvency. Research limitations/implications: Our research sample is limited to the Croatian capital market with a relatively small number of observations, and the ESG score measurement is based on the methodology of the Croatian Financial Services Supervisory Authority, which is applicable to the Croatian environment. The generalization of our results should, therefore, be taken with caution. Originality/value: Given the relatively high frequency of modified audit opinions in our institutional setting, we are able to estimate the association between ESG performance and modified audit opinion more accurately than in alternative settings where modified audit opinions related to non-compliance with accounting standards are ra-ther rare. In addition, this study contributes to the existing literature by examining how ESG disclosure compliance is related to the audit opinion in an environment where firms do not face potentially severe financial consequences of a modified audit opinion.

Purpose This study investigates the impact of ESG (Environmental, Social, and Governance) performance and ESG-related corporate misconduct on firm value and risk. In particular, it explores whether strong ESG performance can mitigate the negative consequences of adverse ESG events. Design/methodology/approach The analysis is based on a robust international panel dataset from LSEG, covering 10,212 companies across 42 countries from 2002–2021. Using panel regression techniques, we examine the effects of ESG scores and ESG controversies on market valuation and risk, while controlling for firm-level heterogeneity, types of controversies, and temporal, sectoral, and geographic fixed effects. Findings The findings reveal that ESG controversies significantly reduce firm value and increase risk levels. However, companies with high ESG scores exhibit a moderating effect: they experience less severe impacts, particularly regarding risk exposure. After controlling for heterogeneous firm value and risk levels, corporate controversies, and different geographical, industry, and period specifications, the results remain significant. Practical implications These findings highlight the strategic relevance of ESG engagement for risk management and value preservation. Firms that invest in ESG practices are better equipped to weather the reputational and financial fallout of adverse events and can enjoy a competitive advantage in the capital markets. Originality/value The paper’s novelty lies in its analysis of ESG practices, controversies, and their impact on firm value and risk, highlighting direct and indirect effects across developed and emerging markets. It reconciles conflicting findings by showing that ESG’s positive indirect effect applies only to high-valued firms and demonstrates its heterogeneous impact on firm value and risk. Finally, it provides novel insights into how ESG scores’ moderating influence varies with controversy severity.

PurposeAssessing the performance and stability of financial institutions is crucial for investors, regulators and stakeholders. The primary purpose of this study was to examine the economic resilience and sustainability performance of banks operating in Türkiye through their capital adequacy, asset quality, management quality, earnings, liquidity, and sensitivity to market risk (CAMELS) and environmental, social and governance (ESG) scores. The research examined whether there was a significant relationship between the CAMELS and ESG scores of the banks in the sample and how they affected each other.Design/methodology/approachThis study analyzed the relationship between the CAMELS and ESG scores of five public and private banks operating in Türkiye. The study used statistical techniques such as correlation, regression and descriptive statistics to analyze the relationship between the CAMELS and the ESG score clusters. The data in the research cover the period 2008–2022 and were obtained from open sources disclosed to the public by the banks.FindingsThe study found a statistically significant relationship between the financial institutions’ CAMELS and ESG scores. Banks with higher CAMELS scores had a better ESG performance; however, this relationship was not linear. Regression analysis allowed for the identification of factors that had a significant impact on ESG scores within the CAMELS framework. No effect was detected on earnings (E), one of the CAMELS elements in the “economic, environmental, and governance elements” section of the banks' ESG scores. Management quality (M) positively affected only governance (G). Additionally, it was determined that the banks’ environmental performance (ENV) positively affected their CAMELS score.Practical implicationsThe positive relationship between the CAMELS and ESG dimensions shows that financial sustainability is essential. The findings are expected to enrich the understanding of financial institutions’ resilience in the context of Türkiye, which constitutes the research sample. In addition, the inferences that can be made from this Turkish sample are essential for informing investment decisions, regulatory frameworks and broader stakeholder engagement in similar markets.Social implicationsAlthough a significant and positive relationship was established between ESG and CAMELS scores, a substantial and positive relationship only sometimes emerged when the sub-elements of the variables in question were examined. Investing in environmental initiatives helps companies build sustainable business models for the long term, paving the way for future profits and improved capital adequacy and liquidity. However, new regulations and practices related to environmental activities may introduce additional costs, necessitating changes to existing business processes.Originality/valueThis study provides important information regarding the interaction in financial institutions between financial stability assessed by CAMELS scores and sustainability performance measured by ESG scores. The findings show that institutions with robust economic fundamentals demonstrate better ESG performance. This indicates that there is a positive relationship between financial stability and responsible business practices. This information will help investors, regulators and stakeholders to make informed decisions about financial institutions, decisions that focus on sustainability. The results also suggest that it is necessary to use dynamic models and analytical tools to address the link between CAMELS and ESG.

PurposeThis article aims to analyse the relationship between the environmental, social and governance (ESG) score and the cost of capital of 600 large, mid and small capitalization companies across 17 countries that are component of the EURO STOXX 600 Index. By examining whether ESG has an impact on the cost of capital, this article contributes to the solutions to improve the impact of organizations and societies on sustainable development. The article further examines whether the effect is because of the environmental, social and/or governance components. In addition, the article analyses which WACC component (i.e. the cost of equity, the cost of debt, the beta or the leverage ratio) is affected. Furthermore, this article analyses whether a high ESG score can substitute for a weaker legal environment.Design/methodology/approachThe results were obtained by using ordinary least squares panel data modelling to analyse the relationship between the ESG score and the cost of capital. The sample consists of companies that are part of the STOXX Europe 600 Index over the period 2018–2021, which is composed of 600 companies, including large, mid and small capitalization firms listed across 17 countries. The sample finally includes 1,960 firm-year observations.FindingsCompanies with a higher ESG score tend to have a lower cost of capital, but this relationship holds only for firms domiciled in countries with a weaker legal environment. In addition, these firms should not only increase their ESG score to create a more sustainable environment but also to reduce their cost of debt. Environmental and social factors have a significantly negative impact on the cost of capital only in countries with a weaker legal environment, while the governance component positively impacts the cost of capital by allowing firms to borrow more.Research limitations/implicationsThere is not yet a standardized taxonomy to define ESG, making the study dependent on commercial data providers.Practical implicationsThe new insights can be used by companies domiciled in countries with weaker legal environments to reduce their cost of capital. The results also allow us to know on which components of the ESG score to focus. It can also help policymakers, specifically those in countries with a weaker legal environment, to provide incentives to further stimulate ESG investments and disclosure, thereby contributing to a more sustainable society.Social implicationsTo achieve the sustainable development goals put forward by the United Nations, it is important for firms to invest in ESG projects. It is nevertheless insightful to know whether these ESG investments, which are currently observed as a cost, also provide benefits to firms and in which countries. If firms clearly see the advantages of investing in ESG projects, they are likely to proactively engage in them.Originality/valueThis article is the first, to the best of the authors’ knowledge, to focus on 17 European countries, thereby capturing divergent legal environments. This setting allows us to answer the main novel research question, namely, whether the ESG score can act as a substitute for the legal environment in which the company is domiciled. The article also goes further than previous articles by examining whether the effect is because of the environmental, social and/or governance component and whether these impact the components of the weighted cost of capital, namely, the cost of equity, the cost of debt, the beta or the leverage ratio of the companies.

PurposeIn the swiftly evolving business landscape, environmental, social and governance (ESG) considerations have gained exceptional prominence, as stakeholders increasingly emphasize accountability and sustainability. This study aims to meticulously probe the intricate interplay between ESG factors, financial performance and the distinct corporate governance landscape that characterizes the Nordic region's crucible of proactive societal and environmental commitment.Design/methodology/approachThe authors begin with a data set of 899 Nordic firms across Sweden, Norway, Denmark, Finland and Iceland. Using the Thomson Reuters database, they refine this data set by excluding non-regional headquarters and entities without ESG scores or year-long financial data. This resulted in a focused data set of 1,360 firm-years spanning a decade, forming the foundation for investigating the link between ESG factors and financial performance in Nordic firms.FindingsDrawing upon empirical data, the authors systematically dissect the correlation between specified financial ratios and ESG scores on the bedrock of sustainability evaluation. The findings underscore a partially significant, yet robust relationship between ESG endeavors and financial performance metrics. Furthermore, the intricate interplay of corporate governance dimensions’ reveals intriguing correlations with financial indicators among the surveyed Nordic enterprises. However, the findings also reveal an intricate weave that underscores the ESG and financial performance nexus.Research limitations/implicationsThis study addresses stakeholders’ theory and unique positions and contributes to the current discussion on sustainability reporting literature by providing empirical evidence of ESG influences on firm profitability through board characteristics in the specific context of the Nordic region. The sample for this study encompasses firms listed in Nordic countries; thus, the results may not be generalizable to unlisted firms and other countries or regions.Practical implicationsThis study suggests that Nordic firms are advanced in reporting ESG in response to diverse stakeholder demands as part of their regular activities. This study provides valuable insights for diverse stakeholders including researchers and regulatory bodies.Social implicationsThis study provides an understanding of stakeholders about the association of ESG and sustainability practices with firm profitability, which might lead to making the world a better place.Originality/valueWhile illuminating the multifaceted ESG-financial performance nexus, this study reveals its intricate nature. This complexity accentuates the compelling need for further exploration to decode the exact outcomes and myriad factors contributing to the array of correlations observed. Through this comprehensive inquiry, this research advances the understanding and underscores the pivotal role of a focused investigation. This study seeks to harmonize ESG practices and financial performance seamlessly within the Nordic business realm.

The study aims to assess the impact of the ESG (Environmental, Social, and Governance) score of the company on its market value. The research focuses on stock companies of financial markets of European Union (EU) Member States for the years 2011–2021. The ESG discourse on the EU regulated markets was examined across nine economic sectors, in line with LSEG terminology. To test the relationship between ESG performance and firm value, the modified Ohlson Valuation Model (OVM) was utilized. Tobin’s Q was considered as the proxy of firm value, RoA as the proxy of the company’s financial performance, and ESG scoring as the proxy of ESG information that is relevant in assessing the market value. Seven control variables for firm characteristics were also included. To account for potential institutional bias, grounded in legitimacy and institutional theories, we employed two dummy variables – COUNTRY and SECTOR. The findings confirmed our research hypothesis that there is a statistically significant relationship between ESG score and firm value. In line with stakeholder theory, the results support the notion that companies with high ESG scores achieve higher firm value than those with low ESG scores, thus shedding more light on the growing importance of ESG factors for the performance of European companies. The study offers new insights into relationship between ESG performance and firm market value, examined from both from country and sectoral perspectives.

As investor interest in indexes’ tilt toward quality factors grows many of them mistakenly conflate ESG (environmental, social, and governance) factors with quality factors when they seek to integrate ESG data into their investment process. This article offers a different perspective on the relationship between quality factors and ESG factors, as well as the financial materiality of different multifactor combinations of quality and ESG factors across six-year monthly rebalanced in-sample backtests (June 28, 2013 to April 30, 2019) on the Russell 1000 Index, Russell 2000 Index, and MSCI EAFE Index. The authors compare the return streams and correlations of ROE, ROA, ROIC, and MSCI IVA Score, and their corresponding equal-weighted multifactor combinations. The ESG and financial quality factors are uncorrelated, suggesting that well-rated ESG companies are not always high-quality companies. In some cases, the combination of quality and ESG is a stronger predictor for high returns than either the quality factor or the ESG factor alone. <b>TOPICS:</b>ESG investing, mutual fund performance, factor-based models, performance measurement <b>Key Findings</b> • The article examines the relationship between quality factors and ESG factors, as well as the corresponding multifactor combinations across six-year monthly rebalanced in-sample backtests on the Russell 1000 Index, Russell 2000 Index, and MSCI EAFE Index. • The data indicates that ESG and financial quality factors are uncorrelated, suggesting that higher-rated ESG companies are not always higher-quality companies. • For both domestic and international large-cap equities, the combination of quality and ESG is a stronger predictor for higher returns than either the quality factor or the ESG factor alone.

Companies and investors in emerging markets have started paying attention to ESG (Environmental, Social, and Governance) issues. There has been a growing demand for aligning ESG disclosure of companies to UN SDGs (United Nations Sustainable Development Goals), so understanding how the firm-level ESG affects the country-level SDG is very important for evaluating the advances in ESG and SDG implementation in emerging markets. This study examines the linkage between firm-level ESG disclosures and their relationship with country-level SDG scores over ten years for three emerging countries: India, China, and Brazil. The analysis of 1,500 top-listed firms in these countries reveals an increasing trend of firms going for ESG disclosures and increased ESG scores over the years in the three markets. Out of the total sample, almost 75% of firms make ESG disclosures in Brazil, followed by 54% in India and 32% in China. Additionally, companies in all these countries tend to emphasize governance-related disclosures more, with Brazil having higher ESG disclosures than India and China. The correlation and causality tests indicate a significant positive correlation between mean ESG scores and country-specific SDG scores. The Dumitrescu-Hurlin panel causality tests provide stronger linkages between firm-specific Environment scores and SDG scores, indicating that a firm’s environment disclosures translate into higher SDG scores. However, the same is not valid for Social and Governance factors. These findings have important implications given the global attention on the linkages between ESG disclosure and SDG score. AcknowledgmentsThe financial and infrastructure support provided by FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.

Purpose: To analyze the impact of the Covid-19 Pandemic on the relationship between ESG (Environmental, Social and Governance) scores and the financial performance of Brazilian publicly traded companies. Methodology: The sample of this study consists of 100 Brazilian non-financial companies listed on B3 (Brasil, Bolsa, Balcão) with information about ESG. The data collection spanned a time series from 2018 to 2021. ESG scores were collected from the Refinitiv Eikon® database, using ROA (Return on Assets) as a proxy for financial performance. Two research hypotheses were tested: the first regarding the association between ESG and financial performance, and the second examining the effect of Covid-19 on this relationship. The hypotheses were tested using the Ordinary Least Squares (OLS) regression model, with controls for time and sector. Results: The results show that the financial performance of firms with ESG Score, Combined, and Environmental classifications demonstrated a positive and significant relationship, meaning that firms with higher ESG scores offered better financial performance on average. However, the non-significant result for the relationship between financial performance and ESG during the Covid-19 period indicates that it cannot be said whether firms with higher ESG scores were more or less impacted by this pandemic period. Contributions of the Study: This study utilized three types of ESG scores (Score, Combined, and Controversies), as well as the ESG pillars: Social, Governance, and Environmental. This allowed for a more comprehensive examination of the ESG indicators available to investors in the selection of companies for resource allocation. This joint analysis also contributes to the advancement of recent literature by analyzing all available ESG indicators for publicly traded companies in Brazil.

This study examines the impact between the Environmental, Social, and Governance (ESG) score and firm value described by market capitalization from the perspective of legitimacy theory. This study focuses on ESG disclosures from 608 companies in Southeast Asia for 5 years. This study tested three dimensions of the ESG Score (environmental, social, and governance pillar score) that most affect the value of the company. ESG Score is measured from the Thomson Reuters Eikon Refinitiv matrix and analyzed with multiple regression analysis. This research shows that ESG disclosure positively affects firm value. This finding shows that every ESG score increase affects the increase in market capitalization. Furthermore, the social score is the most affected by firm value. This study adds to ESG literature by examining three components of ESG score. Previous research focused on each component of ESG. This research uses three components of ESG and its relationship to firm value to examine which component has a strong effect on market capitalization.