ESG and Financial Performance, is there a correlation for the Italian listed organizations?

Abstract: Due to social and environmental crises, the concept of sustainability has grown in importance in our society over the past years. Things are changing, even in the financial industry. From the perspective of investors, the general public, and enterprises, Corporate Social Responsibility and the creation of sustainable value are becoming more and more significant. One of the most cutting-edge tools for actively promoting this paradigm change in investing and corporate strategies is the ESG (Environmental, Social, and Governance) criteria. A more resilient, long-lasting development system that puts humanity back at the centre can therefore be implemented with the help of the union of finance and sustainability through ESG standards. However, to bring this transformation, we must encourage and promote the transition, particularly in nations with a lower propensity towards sustainability, such as Italy. A strategy to ultimately pragmatically incentivize markets toward a true adoption of sustainable themes would be to discover a systematic beneficial association between financial success and ESG standards. Therefore, this study intended to comprehend the nature of the relationship between ESG risk rating and FP by a quantitative analysis of the Italian market. Although the findings counter the general theory, they are consistent with other Italian studies and demonstrate that it is not possible to have empirical proof of a beneficial effect on the ESG-ROE relationship in Italy, probably due to the Italian ESG underdevelopment.