The impact of environmental, social and corporate governance (ESG) criteria and disclosures on sustainable development goals on financial performance: An analysis of companies in the BIST sustainability index

Developments in businesses lead to economic, environmental and governance problems. It is believed that these problems can be solved with the sustainable development goals (SDGs) and ESG (environment, social and governance) criteria. The purpose of the study is to examine the impact of ESG criteria and sustainable development goals on financial performance. The explanatory design of the mixed research method was applied in the study. In the design, firstly, the level of information disclosed by the enterprises about the SDGs (SDG score) was determined by content analysis, one of the qualitative analysis methods. Data are obtained from sustainability, integrated and annual reports of the enterprises. Correlation and Granger causality analysis were applied in the quantitative analysis of the findings. The financial indicators used in the analysis are ROE-return on equity, ROA-return on assets, TBNQ-Tobin's q, EBIT-earnings before interest and taxes, NPM-net profit margin and P/E-price/earnings ratios. Non-financial indicators are overall ESG score, environmental, social, governance and SDG scores. The analysis was conducted with 135 business/year observations of 27 companies in the BIST sustainability index covering the period 2018-2022. The results show that overall ESG and Social scores are positively related to ROE and NPM and negatively related to EBIT. The Environment score is positively related to ROE and negatively related to P/E, and a causal relationship is observed between Environment and EBIT, NPM and P/E. The Governance score has a positive relationship with ROA, ROE, TBNQ and EBIT and a negative relationship with NPM and P/E, while it has a causal relationship with ROA and ROE. While the SDG score is negatively related to NPM and P/E, it has a causal relationship with ROA.