The value relevance of Environmental, Social, Governance performance

In recent years, European firms have faced unprecedented pressure to contribute to a sustainable growth model, to the point where ESG (Environmental, Social, and Governance) performance has become a crucial factor in determining a firm's value. This study focuses on non-financial companies listed in the Euro Area (EA) to explore the significance of ESG performance and its individual pillars (environmental, social, and governance) from 2015 to 2022. Our findings reveal a positive correlation between all ESG components and the market value of firms, offering robust empirical evidence of the beneficial impact of ESG performance on market-based outcomes. This study contributes to the growing body of literature on the economic consequences of ESG performance, providing insightful practical implications for managers, investors and policymakers.