Original Research

Environmental, social and governance and financial performance nexus in South African listed firms

Reon Matemane, Thabiso Msomi, Marvellous Ngundu
South African Journal of Economic and Management Sciences | Vol 27, No 1 | a5387 | DOI: https://doi.org/10.4102/sajems.v27i1.5387 | © 2024 Reon Matemane, Thabiso Msomi, Marvellous Ngundu | This work is licensed under CC Attribution 4.0
Submitted: 22 October 2023 | Published: 30 April 2024

About the author(s)

Reon Matemane, Department of Financial Management, Faculty of Economic and Management Sciences, University of Pretoria, Pretoria, South Africa
Thabiso Msomi, Department of Management Accounting, Faculty of Accounting and Informatics, Durban University of Technology, Durban, South Africa
Marvellous Ngundu, School of Accounting, Economics and Finance, College of Law and Management Studies, University of KwaZulu-Natal, Durban, South Africa


Background: Environmental, social and governance (ESG) factors have become topical in recent years because of climate change existential threat to humanity. There is, however, a limited understanding of how the firm’s ESG efforts affect firm outcomes.

Aim: The aim of this study was to investigate the relationship between firm’s ESG indicators and the financial performance.

Setting: The sample is drawn from Johannesburg Stock Exchange (JSE) listed companies based on data availability. South Africa is not only plagued by social ills and governance failures, but it is also one of the world’s largest emitters of greenhouse gases, making it an ideal laboratory for studying the ESG and firm performance nexus.

Method: We utilized a dataset spanning the years 2012–2022, covering 67 JSE-listed firms. These panel data were analyzed using the two-step system generalised method of moments (GMM).

Results: We found that the disaggregated ESG indexes have a positive, albeit insignificant impact on the financial performance. These findings hold even when financial and non-financial firms are examined separately.

Conclusion: Policymakers, including standard setters and regulators, should encourage firms to be sincere on ESG efforts and avoid greenwashing.

Contribution: The study employs a relatively robust estimation technique (two-step system GMM) over a relatively long period (2012–2012). Furthermore, the sectoral analysis of financial and non-financial firms adds to the body of literature and policy development.


ESG; greenwashing; financial performance; system generalised method of moment; South African-listed companies

JEL Codes

D22: Firm Behavior: Empirical Analysis; E22: Investment • Capital • Intangible Capital • Capacity; Q54: Climate • Natural Disasters and Their Management • Global Warming

Sustainable Development Goal

Goal 13: Climate action


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