A Research on the Relationship between ESG Performance of Companies and Systematic Risk

Year 2025, Volume: 12 Issue: 1, 348 - 362, 31.03.2025

Zühal Arslan , Mehmet Levent Erdaş , Gamze Göçmen Yağcılar

https://doi.org/10.30798/makuiibf.1600852

Abstract

Today, companies have started to focus on sustainability efforts to maximize market value and reduce risks. One of the measures used to express the sustainability performance of companies is environmental, social and governance (ESG) scores. High ESG performance is expected to contribute to the systematic risk reduction by lowering the cost of capital, therby increasing market value. This study aims to analyze this relationship for companies traded in Borsa Istanbul that possess ESG ratings. Findings reveal that ESG components have a long-term relationship with the Beta coefficient, which represents systematic risk. In addition, causality tests produce significant findings and a bidirectional causality relationship was detected between the corporate governance score and beta coefficient. When evaluating the results within the scope of environmental and social scores, the causality relationships from ESG environmental and social scores to the beta coefficient are determined. These results offer insights into how sustainability practices can contribute to firms' risk management processes.

Keywords

Sustainability, Systematic Risk, ESG Performance

Ethical Statement

Ethics Committee approval was not required for this study. The authors declare that the study was conducted in accordance with research and publication ethics. The authors confirm that no part of the study was generated, either wholly or in part, using Artificial Intelligence (AI) tools. The authors affirm that there are no financial conflicts of interest involving any institution, organization, or individual associated with this article. Additionally, there are no conflicts of interest among the authors. The authors affirm that they contributed equally to all aspects of the research.

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