Assessment of the impact of ESG ratings on the financial performance of companies in the financial sector

This study examines the relationship between Environmental, Social, and Corporate Governance (ESG) ratings and the financial performance of companies in the financial sector. The aim of this research is to identify the correlation between ESG ratings and key financial indicators such as Return on Equity (ROE) and Return on Assets (ROA). By analyzing the integration of ESG in financial institutions, the study seeks to provide an understanding of the potential value creation and risk mitigation strategies associated with sustainable practices in the financial industry. Financial index data were sourced from SmartLab and Analizbankov, while non-financial reports were obtained from RAEX. The analysis was conducted using a Partial Least Squares Structural Equation Modeling (PLS-SEM) approach. The results of our study confirmed a positive correlation between ESG and ROA, underscoring the importance of considering ESG in investment decisions and corporate strategy formulation within the financial sector. However, the link with ROE was deemed insignificant due to the quality of data comprising this variable. This research holds practical significance for investors, analysts, regulators, and corporate leaders by facilitating more informed decision-making processes aligned with sustainable development principles.