This study aims to identify and state the relationship between Environmental, Social, and Governance (ESG) scores and firm value in terms of profitability and market value to fill the gap in the research for studies of this nature on the United Kingdom (UK). The analysis was conducted on the data from 13 UK banks in a seven-year sample period from 2015 – 2021. The results were generated through a series of five pooled regressions which included three regressions on profitability metrics including ROE, ROTA, and ROC, as well as two regressions on market value metrics including PB and TQ. ESG scores are proxied by one combined ESG score generated by Bloomberg. The results indicated a negative and significant relationship between ESG scores and all of
the measures of profitability and market value. It is believed that these results occur as a result of the long-term nature of the benefits that are available from ESG investing, lack of visibility and/ or ability of manipulation of an ‘ESG score’. Suggestions have been made to policymakers and bank managers as to how to proceed in light of the findings. These suggestions include, increasing visibility and availability of information on ESG scores for bank managers and policymakers; offering subsidies to banks for investing in ESG; and aligning ESG investments with companywide objectives.
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