SUSTAINABILITY PERFORMANCE AND CORPORATE FINANCIAL PERFORMANCE: EVIDENCE FROM THE G20 COUNTRIES

Abstract

This study analyzes the relationship between sustainability and financial performance in a sample of G20 firms over a decade (2010-2021), while controlling for relevant variables. Results show a positive bidirectional relationship between sustainability and accounting-based financial performance, particularly during the COVID-19 pandemic. The study also examines the moderating effects of ESG-related compensation policies and CSR sustainability committees. It finds that ESG-related compensation policies positively moderate the relationship between sustainability and financial performance, while CSR sustainability committees positively moderate the impact of financial performance on sustainability performance and negatively moderate the effect of sustainability on financial performance. Furthermore, the study expands on the sustainability-CFP relationship by examining heavily polluted and less polluted industries and the Fama & French five industry sectors. It indicates that the positive bidirectional relationship between sustainability and financial performance is stronger for heavily polluted industries, and the relationship varies across industry sectors.