The impact of ESG dimensions on financial strategy of the oil and gas firms in OPEC countries

ESG is gaining importance for various stakeholders of a firm, as it is expected to result in improved operational efficiency, public perception, and the firm’s reputation. It is often considered to also result in improved financial performance, reduced market risks, and improved market value of the firm. The focus on ESG initiatives varies across industries due to industry-specific practices and external pressure, with ESG practices in the oil & gas industry being intensely scrutinized due to various social and environmental concerns. This study examines the impact of the ESG dimensions’ scores on the financial strategy of oil & gas firms in OPEC countries for the period 2022–2024, using the PLS-SEM approach. Considering three aspects of financial strategy: financial performance (represented by ROA and ROE); market risk (represented by Sharpe ratio and Beta); and market value (share price and market capitalization), and using two additional variables, board size and gender diversity in the board, the study provides evidence of no significant impact of ESG dimensions and board variables on the financial strategy of the oil & gas firms in OPEC countries.