Evaluating the Relationship Between ESG Disclosure and Corporate Financial Performance: A Study of SADC Stock Exchanges (2018-2024)

Abstract: This study investigates the impact of Environmental, Social, and Governance (ESG) disclosure on the financial performance of firms listed on selected Southern African stock exchanges. A quantitative, comparative research design was employed using panel data covering 2018 to 2024. The sample comprised 72 randomly selected companies—10 each from the Johannesburg Stock Exchange (JSE), Zimbabwe Stock Exchange (ZSE), Botswana Stock Exchange (BSE), Dar es Salaam Stock Exchange (DSE), Malawi Stock Exchange (MalSE), Lusaka Securities Exchange (LuSE), and Stock Exchange of Mauritius (SEM), and two from the Eswatini Stock Exchange (ESE)—resulting in 504 firm-year observations. ESG disclosures were assessed using a structured 30-item index based on GRI, SASB, and TCFD frameworks, scored on a 0–2 Likert scale. Corporate financial performance was measured using a Composite Financial Performance (CFP) indicator, derived by standardizing and averaging Return on Assets (ROA) and Return on Equity (ROE). Data analysis included descriptive statistics, Pearson correlation, and panel regression. Findings indicate moderate ESG disclosure levels, with governance reporting being the most consistent. However, ESG scores exhibited no significant positive relationship with CFP, and environmental disclosures were negatively associated with financial performance, suggesting potential short-term cost implications. Traditional financial variables such as debt-to-equity ratio remained strong predictors of profitability. These results suggest that ESG practices among firms on Southern African stock exchanges are still evolving and may be driven more by compliance than strategic integration, limiting immediate financial benefits. Keywords: ESG disclosure, financial performance, SADC, panel data, responsible investment