Does ESG Performance Affect Firms’ Performance? Evidence from European Energy Companies

This study investigates the effect of ESG performance on economic and market performance of European energy companies. Findings show that: (a) compared to the traditional energy companies, renewable energy companies experience a lower economic and market performance, but they enjoy greater benefits from their commitment to ESG issues, (b) during crisis periods the costs associated with energy companies’ ESG engagement outweigh the anticipated benefits, and (c) the national capitalism model significantly moderates the relationship between energy companies’ ESG performance and their economic and market performance. Overall, our findings provide significant insight and implications for managers and policymakers. Being sustainable pays off and helps to meet stakeholders’ expectations, thus increasing social trust. However, European policymakers should enact legislative provisions to push energy companies towards greater commitment to ESG issues and, at the same time, they should consider a stable solution to financially support the use of renewable energy sources. Future research could further investigate the effects produced by the current economic and energy crisis which is affecting Europe, and whether the measures adopted by the EU policy-makers will have produced real benefits for energy companies engaged in ESG issues.