ESG & Financial Performance : A Study Within the Global Mining Industry

In today’s world sustainability is a growing and increasingly important topic. ESG (Environmental, Social and Governance) is a widely accepted measure of sustainable performance for companies that help companies, shareholders and stakeholders to evaluate their work on sustainability. ESG can be broken down into the three main pillars of environmental, social and governance. This study used the combined ESG score as well as the individual score for each pillar to analyze what has the most impact and get a deeper understanding. Companies play a key role in whether emissions co reduced, and global warming will slow down. The mining industry is one of the industries that faces sustainability challenges since it is associated as a non-sustainable industry. At the same time the mining industry is crucial for a modern society and therefore it needs to become more sustainable. This thesis aims to test the relationship between ESG performance and financial performance for mid- and large-cap mining firms. The financial performance has been divided into three financial metrics of Return on Assets (ROA) that represents the accounting-based, Tobin’s Q that is the market-based and Operating Cash Flow ratio that is the Cash Flow-based performance. To investigate the relation between sustainable performance and financial performance many regression analyses were created. The regression models consisted of all the different ESG and pillar scores along with the three different financial performance metrics for the three different groups of mid- and large-cap firms separately and as one group. 100 different companies form the mining industry are a part of this study and the data is collected from the period 2014 to 2024. The findings of this study reveal no significant relation between ESG score and the different financial performance metrics for any of the three different groups. However, the E-pillar and ROA had a significant positive relation as well as the S-pillar and the Operational Cash Flow ratio for the whole group and mid-cap firms. Large-cap firms had a significant negative relation for the S-pillar and Tobin’s Q and all the other tests did not find a significant relation between the sustainable and financial performance. The G pillar failed to find a significant relation with the financial performance metrics. The Shareholder theory argues that the companies only should act in a way that maximizes profit and the Stakeholder theory argues that the companies should take the stakeholders into account and not only focus on profits. The result of this thesis seems to align best with the Stakeholder theory not the Shareholder theory since four out of five significant relations were positive and the only significant negative relation was for large-cap firms with one financial metric Tobin’s Q and only the social pillar.