SEOUL, Nov. 3 (Korea Bizwire) — Companies with stronger ESG (environmental, social and governance) capability tend to have better financial performance, a local think tank said Tuesday.
The Korea Institute for Industrial Economics and Trade released a report that analyzed the correlation between ESG grade and return on assets (ROA) for 868 listed companies in South Korea.
The analysis revealed that the companies with higher ESG grades recorded higher ROA.
In more detail, the firms with a 1 percent higher rating in overall ESG and each of the three ESG categories recorded a higher ROA of 0.031 percentage points, 0.024 percentage points, 0.033 percentage points and 0.031 percentage points, respectively.
However, the correlation between ESG grade and ROA showed different patterns by industry type.
Maritime transport companies with a 1 percent higher rating in the ‘Environmental’ category recorded a higher ROA of 0.3 percentage points, but companies involved in the production and development of medical, precision and optical equipment actually recorded a lower ROA of 0.3 percentage points.
Information service firms with a 1 percent higher rating in the ‘Social’ category recorded a higher ROA of 0.33 percentage points, to be contrasted with those in video and audio production and distribution, which reported a lower ROA of 0.19 percentage points.
In the ‘Governance’ category, information service firms with a 1 percent higher rating recorded a higher ROA of 0.23 percentage points, but printing and recording media duplication companies recorded a lower ROA of 0.06 percentage points.
Ashley Song (email@example.com)