ESG Scores and Corporate Performance in Emerging Markets: Evidence from E7 Countries

Considering not only financial indicators but also ESG scores in assessing success provides an integrated approach in the performance evaluation of companies. The aim of this study is to analyze the performance of companies that are listed in the sustainability index of each E7 country according to their ESG scores and financial ratios, and to make comparisons at both micro and country levels. Utilizing a decision tree approach, this research investigates how ESG scores and key financial ratios influence corporate performance (ROA, ROE, and ROS) among firms in the E7 emerging economies for the year 2023. The reflection of the 2023 economic outlook on companies also supports the results of the study. India exhibited the most consistent and positive ESG-performance relationships for the three financial indicators examined. Among the countries where the ESG score created a difference, in ROA analysis, Türkiye had the greatest difference. ESG scores had a negative contribution to the ROE performance of the companies in Türkiye, China, and Mexico. In the ROS analysis, the first level of differentiation of the decision tree was the inventory turnover ratio. The findings aim to provide valuable information to companies in the E7 countries on developing their current situations to turn into sustainability-focused strategies and improving their corporate performance. It also highlights the importance of ESG integration for policymakers in achieving sustainable development goals.