ESG and Financial Performance in Times of Crisis: A Panel Study of European Listed Financial Firms Before and During the Covid-19 Pandemic

Abstract

This thesis analyses the rela;onship between ESG factors and financial performance — proxied by ROA and ROE — among publicly listed European financial companies over the 2017-2022 period. The central ques;on is whether ESG performance held greater financial relevance during the Covid-19 crisis period (2020–2022) than in the pre-crisis period (2017–2019), and whether the environmental, social and governance components had differen;al impacts on firm performance during a period of economic crisis. A panel data analysis was employed to achieve the objec;ves of this study, based on a dataset primarily sourced from Refini;v Eikon and complemented by further informa;on from S&P Capital IQ. This dataset comprises 146 listed European financial companies from 2017 to 2022. Fixed effects regressions were es;mated, focusing on the interac;on between ESG performance and the Covid-19 period to assess whether ESG contributed to firms’ resilience during the pandemic. The analysis further disaggregated ESG into its three pillars to evaluate the financial materiality of each component. The findings reveal that firms’ overall ESG performance did not affect ROA and ROE significantly during both stable periods and the Covid-19 crisis period. Nonetheless, a posi;ve and significant impact of the social pillar on financial performance was observed during the pandemic years, emphasising the relevance of employee welfare and stakeholder engagement during a crisis. The effects of environmental and governance factors were not sta;s;cally significant. The results suggest that, although ESG integra;on is widely regarded as a strategic priority, its financial effects are not reflected in short-term accoun;ng metrics — par;cularly within the financial sector. The research highlights the need for more granular, industry-specific analysis and urges corporate leaders to embrace ESG as a long-term investment in resilience and stakeholder trust.