Sustainability Reporting, Corporate Governance, and Financial Performance: Analyzing the Role of ESG Factors in Investment Decisions
Abstract
This study investigates the interconnections between sustainability reporting, corporate governance, and financial performance, with a specific focus on the influence of Environmental, Social, and Governance (ESG) factors on investment decisions. The primary aim is to assess how ESG disclosures affect corporate reputation, risk management, and long-term profitability and to examine the mediating role of corporate governance in the relationship between sustainability reporting and financial outcomes. Additionally, this study seeks to identify the major challenges and opportunities associated with the integration of ESG factors into investment strategies across different industries and regions. A qualitative methodology based on a systematic literature review is employed to explore how companies that actively disclose sustainability information and demonstrate strong governance practices perform financially.
The findings indicate that ESG criteria are becoming increasingly relevant in investment decision making, with investors prioritizing sustainability and social responsibility. Furthermore, the results suggest that firms with robust corporate governance are better positioned to manage ESG risks and seize emerging opportunities, thus contributing to improved financial outcomes. However, persistent challenges such as inconsistent reporting standards and a lack of harmonized regulatory frameworks have also been identified. This study emphasizes the need for further empirical research to better understand the broader implications of ESG integration, aiming to inform companies, investors, and policymakers seeking to enhance corporate sustainability and financial performance within a dynamic global market.
Keywords: Sustainability reporting, Corporate governance, Financial performance, ESG factors, Investment decisions.
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