ESG score, stock price, volatility, and sustainable strategic management : A study with focus on 20 Indian companies

Abstract: Background: Sustainability in business has become an essential part for firms to consider, as stakeholder’s concerns are increasing, and the use of ESG scores has increased in the last years. Prior research mostly examines the European and US market and the relationship between ESG score and financial performance. Hence, a gap regarding ESG scores effect on stock performance, and possibilities for sustainable strategic management, was found on the Indian market as an emerging economy.  Purpose: The purpose of this thesis is to examine the relationship between ESG, stock performance, and sustainability reporting of Indian companies. Thus, enable a deeper understanding of the impact of sustainable development on firms.  Method: This research has followed positivism and social constructionism, with a deductive approach, and both a quantitative and qualitative method. Purposive sampling is used, by collecting the stock prices, volatility and ESG scores for firms from the index Nifty 50. Two portfolios were conducted from the samplings, representing the firms with the highest and the lowest ESG scores, along with an analysation of the individual companies. The data were analysed in STATA by an OLS regression analysis and Pearson correlation test, to test the hypotheses. Observations of the firm’s sustainability reports were analysed to gather their sustainable actions.  Conclusion: The results indicated that ESG have a positive effect on stock prices, on the Indian market. Thus, firms would benefit from achieving a higher ESG-score. However, due to varying results regarding volatility, results could not be determined whether firms achieve any improved stability from a higher ESG score. The findings also show that there are differences between high and low ESG scored firms regarding SDGs, policy frameworks, anti-corruption and the ESG approach. Which indicate opportunities for Indian firms to develop their sustainable actions, to increase value creation for stakeholders.