Governance and value: A disaggregated environmental, social, and governance (ESG) analysis of corporate financial performance (CFP) in Philippine publicly listed firms

We investigated the relationship between Environmental, Social, and Governance (ESG) performance and corporate financial performance (CFP) among publicly listed firms in the Philippines from 2015 to 2024. Utilizing Bloomberg's ESG scores, we employed a triangulated econometric framework that combines contemporaneous estimation through Feasible Generalized Least Squares (FGLS), and dynamic panel modeling using the Panel Generalized Method of Moments (GMM). Our analysis incorporated both aggregated ESG scores and disaggregated pillars, Environmental (E), Social (S), and Governance (G), and examined their respective impacts across a comprehensive set of CFP indicators, including profitability, liquidity, solvency, efficiency, growth, and market valuation. Our results revealed that Governance performance emerges as the most consistently significant predictor, demonstrating positive associations with firm growth and market-based metrics. Our results also revealed that Governance scores exert robust contemporaneous effects, particularly on asset growth and market capitalization. However, social performance exhibits delayed financial implications, with lagged effects primarily influencing profitability indicators in the dynamic panel model. Environmental scores show limited and less consistent impact, reflecting the underweighting of environmental strategies in firm-level financial outcomes during the period. Meanwhile, macroeconomic variables, such as GDP growth and the weighted average cost of capital (WACC), were included as moderators. While GDP growth had minimal influence, WACC remained a binding constraint in specific governance-CFP pathways, indicating the persistent role of capital cost management in sustainability-aligned financial decisions. Our findings provide actionable insights for corporate managers, investors, and policymakers by highlighting the financial relevance of governance-driven ESG strategies, the time-sensitive value of social investments, and the need for prudent management of capital costs in promoting ESG-aligned performance.