IMPACT OF ESG (ENVIRONMENTAL, SOCIAL, GOVERNANCE) FACTORS ON STOCK PERFORMANCE IN INDIA

This study investigates the impact of Environmental, Social, and Governance
(ESG) factors on the equity performance of Indian companies from 2020 to 2024, with
a focus on sectoral variations in ESG adoption. The growing significance of ESG
practices in corporate strategy is explored within the context of regulatory frameworks,
particularly the Business Responsibility and Sustainability Reporting (BRSR)
guidelines introduced by the Securities and Exchange Board of India (SEBI). The
research examines the extent to which ESG performance influences stock prices and
evaluates the role of sustainability in enhancing financial stability and long-term value
creation. Findings indicate that sectors such as cement and metals, which face stricter
regulatory oversight, have shown greater responsiveness to ESG mandates. In contrast,
industries like banking and real estate continue to lag in ESG integration. Interestingly,
the study reveals that higher ESG scores do not always correlate with stock price
appreciation, suggesting that other market variables significantly influence equity
valuations. However, companies with consistent ESG practices—such as Infosys Ltd.
and Hindustan Unilever Ltd.—demonstrate stronger market resilience and investor
trust, reinforcing the long-term benefits of ESG alignment. The research also highlights
a perceptible shift in investor behavior, with increasing preference for firms that
prioritize ethical governance and sustainable practices. As ESG disclosures become
more standardized and transparent, they are expected to play a more influential role in
shaping corporate performance and influencing the financial ecosystem of India. For
companies, this represents both a strategic opportunity and a challenge—to align
profitability with sustainability imperatives.