Impact of ESG Components on Firms’ Performance

Firms' performance and engagement in environmental, social, and governance (ESG) activities in Africa and Middle East seems low compared to developed countries.This paper investigates impact of environmental, social, and governance components of ESG on firms' performance.The paper applies the two-step system generalized method of moments and 165 ESG firms covering 2012 to 2022 periods.The results reveal that each component of ESG is significantly and positively related to firms' performance.Specifically, environmental component of ESG significantly increases firms' performance.Likewise, social component of ESG significantly increases firms' performance.Moreover, governance component of ESG significantly increases firms' performance.The results suggest that firm-managers and investors should consider the separate impact of ESG components as positive drivers of firms' performance.